Production and income distribution Consider and economy with the following production technology: ,Y = 9K1/3L 2/3 where the aggregate capital stock is K=100, and aggregate labor is L=100. The price of output is 1. a) Write down the maximization problem of the firm. b) Compute the equilibrium wage and capital return. c) Compute total payments to labor and capital. Show Euler’s Theorem holds, i.e. show that total payments to capital and labor equal the value of output.

Production and income distribution Consider and economy with the following production technology: ,Y = 9K1/3L 2/3 where the aggregate capital stock is K=100, and aggregate labor is L=100. The price of output is 1. a) Write down the maximization problem of the firm. b) Compute the equilibrium wage and capital return. c) Compute total payments to labor and capital. Show Euler’s Theorem holds, i.e. show that total payments to capital and labor equal the value of output.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: The Markets For The Factor Of Production

Section: Chapter Questions

Problem 8PA

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