Suppose that an economy’s production function is Cobb–Douglas with parameter a=0.3. a. What fractions of income do capital and labor receive? b. Suppose that immigration increases the labor force by 10 percent.What happens to total output (in percent)? The rental price of capital? The real wage? c. Suppose that a gift of capital from abroad raises the capital stock by 10 percent.What happens to total output (in percent)? The rental price of capital? The real wage? d. Suppose that a technological advance raises the value of the parameter A by 10 percent. What happens to total output (in percent)? The rental price of capital? The real wage?
Suppose that an economy’s production function is Cobb–Douglas with parameter a=0.3. a. What fractions of income do capital and labor receive? b. Suppose that immigration increases the labor force by 10 percent.What happens to total output (in percent)? The rental price of capital? The real wage? c. Suppose that a gift of capital from abroad raises the capital stock by 10 percent.What happens to total output (in percent)? The rental price of capital? The real wage? d. Suppose that a technological advance raises the value of the parameter A by 10 percent. What happens to total output (in percent)? The rental price of capital? The real wage?
Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter18: The Markets For The Factor Of Production
Section: Chapter Questions
Problem 9PA
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Suppose that an economy’s production function is Cobb–Douglas with parameter a=0.3.
a. What fractions of income do capital and labor receive?
b. Suppose that immigration increases the labor force by 10 percent.What happens to total output (in percent)? The rental price of capital? The real wage?
c. Suppose that a gift of capital from abroad raises the capital stock by 10 percent.What happens to total output (in percent)? The rental price of capital? The real wage?
d. Suppose that a technological advance raises the value of the parameter A by 10 percent. What happens to total output (in percent)? The rental price of capital? The real wage?
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