1.Consider the following production function:

Y = F(K,L)=A(2K+3L)

Does this production function exhibit constant returns to scale? (Hint: Replace K and L by 2K and 2L, respectively, and check if F(2K,2L) = 2F(K,L).

2.Consider the following production function:

Y = F(K, L) = AK^0.4L^1.0

a) Calculate the marginal product of labor.

b) Does this production function exhibit diminishing marginal product of labor?

3.Suppose the table represents the production function of both Mexico and Spain. Use the following information to answer the next questions.

Country

L=Population (millions)

K = Capital (trillions)

Y = Output (trillions)

Mexico

105

0.18

1.0

Spain

45

0.74

1.7

a) Calculate total factor productivity for both countries using Equation 3.

Equation 3.A =

b) Calculate per capita income for both countries.

c) Explain the difference in per capita income.