Some economists believe that the US. economy as a wholecan be modeled with the following production function, calledthe Cobb-Douglas production function: Y = AK¹/32/3where Y is the amount of output K is the amount of capital, L isthe amount of labor, and A is a parameter that measures thestate of technology. For this production function, the marginalproduct of labor is MPL = (2/3) A(K/L)¹/³. Suppose that theprice of output P is 2, A is 3, K is 1,000,000, and L is 1/100. Thelabor market is competitive, so labor is paid the value of itsmarginal product.a. Calculate the amount of output produced Y and the dollarvalue of output PY.b. Calculate the wage W and the real wage W/P. (Note: Thewage is labor compensation measured in dollars, whereas thereal wage is labor compensation measured in units of output)

As we know that Cobb-Douglas production function models represents the relationship among production…

Some economists believe that the US. economy as a whole can be modeled with the following production function, called the Cobb-Douglas production function: Y = AK¹/3 L2/3 where Y is the amount of output K is the amount of capital, L is the amount of labor, and A is a parameter that measures the state of technology. For this production function, the marginal product of labor is MPL = (2/3) A(K/L)¹/3. Suppose that the

Some economists believe that the US. economy as a whole can be modeled with the following production function, called the Cobb-Douglas production function: Y = AK¹/3 L2/3 where Y is the amount of output K is the amount of capital, L is the amount of labor, and A is a parameter that measures the state of technology. For this production function, the marginal product of labor is MPL = (2/3) A(K/L)¹/3. Suppose that the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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