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Given a production function | Y₁ = AK ''³¹²²³ if A = 2, L = 4, 5 = 0.2. and=0.05 (a) Calculate the steady-state level of capital and output. (b) Does this production function exhibit constant returns to scale or does it exhibit diminishing marginal returns? Explain, and define the difference between these two concepts.

Given a production function | Y₁ = AK ''³¹²²³ if A = 2, L = 4, 5 = 0.2. and=0.05 (a) Calculate the steady-state level of capital and output. (b) Does this production function exhibit constant returns to scale or does it exhibit diminishing marginal returns? Explain, and define the difference between these two concepts.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Given a production function | Y₁ = AK ''³¹²²³ if A = 2, L = 4, 5 = 0.2. and=0.05 (a) Calculate the steady-state level of capital and output. (b) Does this production function exhibit constant returns to scale or does it exhibit diminishing marginal returns? Explain, and define the difference between these two concepts.
Transcribed Image Text:Given a production function | Y₁ = AK ''³¹²²³ if A = 2, L = 4, 5 = 0.2. and=0.05 (a) Calculate the steady-state level of capital and output. (b) Does this production function exhibit constant returns to scale or does it exhibit diminishing marginal returns? Explain, and define the difference between these two concepts.
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