1. Suppose the Cobb-Douglas production function in an economy is Y=KL, where K is the amount...

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1. Suppose the Cobb-Douglas production function in an economy is Y=KL", where K is the amount of capital and Z is the amount of labor. The economy begins with 60 units of capital and 100 units of labor. a. How much output does the economy produce? b. Calculate the real wage of the labor and real rental price of the capital at equilibrium. c. What are the capital's share of income and the labor's share of income if labor decreases from 100 to 80 units and capital remains the same? 1. Suppose the Cobb-Douglas production function in an economy is Y=KL", where K is the amount of capital and Z is the amount of labor. The economy begins with 60 units of capital and 100 units of labor. a. How much output does the economy produce? b. Calculate the real wage of the labor and real rental price of the capital at equilibrium. c. What are the capital's share of income and the labor's share of income if labor decreases from 100 to 80 units and capital remains the same?

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ANSWER To solve this problem we need to use the given CobbDouglas production function and the initia... View the full answer