Assume that a competitive economy can be described by a constant returns to scale, Cobb–Douglas, pro- duction function. Suppose that in this economy all factors of production are fully employed. Holding other factors constant, including the quantity of capital and technology, carefully explain how a one-time, 10-percent decrease in the quantity of labor will change labor’s share of total income?
Assume that a competitive economy can be described by a constant returns to scale, Cobb–Douglas, pro- duction function. Suppose that in this economy all factors of production are fully employed. Holding other factors constant, including the quantity of capital and technology, carefully explain how a one-time, 10-percent decrease in the quantity of labor will change labor’s share of total income?
Chapter16: The Markets For Labor, Capital, And Land
Section: Chapter Questions
Problem 13P
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Assume that a competitive economy can be described by a constant returns to scale, Cobb–Douglas, pro- duction function. Suppose that in this economy all factors of production are fully employed. Holding other factors constant, including the quantity of capital and technology, carefully explain how a one-time, 10-percent decrease in the quantity of labor will change labor’s share of total income?
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