4. Solving the production model: Suppose the production function at the core of our model is given by Y = A KAL4 (that is, assume the exponents on capital and labor are 3/4 and 1/4 rather than 1/3 and 2/3). (a) Create a new version of Table 4.1 for the new version of the model. What are the five equations and five unknowns? (Hint: The hiring rules for capital and labor will change in the obvious way.) (b) Now solve these equations to get the solution to the model. Put your solution in the same form as Table 4.2. (c) What is the solution for the equilibrium level of output per person?
4. Solving the production model: Suppose the production function at the core of our model is given by Y = A KAL4 (that is, assume the exponents on capital and labor are 3/4 and 1/4 rather than 1/3 and 2/3). (a) Create a new version of Table 4.1 for the new version of the model. What are the five equations and five unknowns? (Hint: The hiring rules for capital and labor will change in the obvious way.) (b) Now solve these equations to get the solution to the model. Put your solution in the same form as Table 4.2. (c) What is the solution for the equilibrium level of output per person?
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.2P
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Transcribed Image Text:4. Solving the production model: Suppose the production
function at the core of our model is given by Y =
A K4L4 (that is, assume the exponents on capital and
labor are 3/4 and 1/4 rather than 1/3 and 2/3).
(a) Create a new version of Table 4.1 for the new
version of the model. What are the five equations
and five unknowns? (Hint: The hiring rules for
capital and labor will change in the obvious way.)
(b) Now solve these equations to get the solution to the
model. Put your solution in the same form as Table
4.2.
(c) What is the solution for the equilibrium level of
output per person?
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