Answered: Suppose a firm has a Cobb-Douglas…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose a firm has a Cobb-Douglas production function given by:

Q = A * L^0.5 * K^0.5

If the firm currently employs 100 units of labor and 64 units of capital and produces 500 units of output , can you calculate the value of the total factor productivity for this firm?

Expert Solution

Step 1: Introduction to Cobb-Douglas Production Function

Cobb-Douglas production function is used in economics to describe how firms combine labor and capital to produce output.

It is represented as:

$Q equals A asterisk times L to the power of alpha asterisk times K to the power of beta$

Where Q is the total output, L is the labor input, K is the capital input, and A is the total factor productivity.

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