1. O LounchPad • Country A and country B bothhave the production functionY = F(K, L) = K/³L²/3.a. Does this production function have constantreturns to scale? Explain.b. What is the per-worker production function,y = f(k)?c. Assume that neither country experiencespopulation growth or technological progressand that 20 percent of capital depreciates eachyear. Assume further that country A saves10 percent of output each year and countryB saves 30 percent of output each year. Usingyour answer from part (b) and the steady-statecondition that investment equals depreciation,find the steady-state level of capital per work-er for each country. Then find the steady-statelevels of income per worker and consumptionper worker.d. Suppose that both countries start off with acapital stock per worker of 1. What are thelevels of income per worker and consumptionper worker?

A production function has constant return to scale if the inputs and the outputs change by the…

Answered: O LounchPad • Country A and country B…

O LounchPad • Country A and country B both have the production function Y = F(K, L) = K/³L?/3. %3D a. Does this production function have constant returns to scale? Explain.

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter17: Economic Growth: Resources, Technology, Ideas And Institutions

Section: Chapter Questions

Problem 6WNG

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