Given the following production function Y=AKα L 1-α Where; Y is the total output of the economy K is the amount of land, and L is the labor force of the economy Assume A=1 and  = 0.5 The initial values of K and L is 100 units. a. How much output does the economy produce? b. What are the wage and rental price of land? c. What share of output does land receive?

Given the following production function Y=AKα L 1-α Where; Y is the total output of the economy K is the amount of land, and L is the labor force of the economy Assume A=1 and  = 0.5 The initial values of K and L is 100 units. a. How much output does the economy produce? b. What are the wage and rental price of land? c. What share of output does land receive?

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: The Markets For The Factor Of Production

Section18.4: The Other Factors Of Production: Land And Capital

Problem 4QQ

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Question

Q 1. Given the following production function

Y=AK^α L ^1-^α

Where;

Y is the total output of the economy

K is the amount of land, and

L is the labor force of the economy

Assume A=1 and  = 0.5

The initial values of K and L is 100 units.

a. How much output does the economy produce?

b. What are the wage and rental price of land?

c. What share of output does land receive?

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