) Assume a production function is in the form of Y=AF(K,N) in which labor's share of income is 80% and capital's share of income is 20%. Write down the Cobb-Douglas production function for this economy. 3. a) ( b). In this economy, how much will real GDP grow if labor grows at 3%, the capital stock grows at 2%, and total factor productivity increases by 2.4%?

) Assume a production function is in the form of Y=AF(K,N) in which labor's share of income is 80% and capital's share of income is 20%. Write down the Cobb-Douglas production function for this economy. 3. a) ( b). In this economy, how much will real GDP grow if labor grows at 3%, the capital stock grows at 2%, and total factor productivity increases by 2.4%?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter7: Production Economics

Section: Chapter Questions

Problem 7E

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Assume that we have a Cobb-Douglas type aggregate production function in the form: Y=W.Kr.L1-r where : W=technology and r is standard share parameter of Cobb-Douglas production function. a. Find Marginal Rate of Technical Substitution (MRTS) between K and L. b. Why does (or does not) technology affects MRTS? Explain. c. Find output per effective labor; capital per effective labor (y=Y/WL and k= K/WL ). d. Find elasticity of substitution between K and L. Why does (or does not) the result different from previous question (Question-1) (Y=Ka.Lb) ?
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