Question: Consider the simple (one-period) production model. The production function is Cobb-Douglas, exhibits constant returns to scale, and the exponent on capital equals 0.90. In year

Consider the simple (one-period) production model. The production function is Cobb-Douglas, exhibits constant returns to scale, and the exponent on capital equals 0.90.

In year 2010, the economy's parameter values were A=1,000, K=300 and L=300? Compute the equilibrium wage and capital rental rate. Pick the closest value.

The wage is 900 and the rental rate 100.

The wage is 100 and the rental rate 900.

The wage is 569 and the rental rate 487.

The wage is 524 and the rental rate 477.

Over the following decade, the economy experienced immigration as well as changes in its capital stock and TFP (A). As a result, in year 2020, the economy's parameter values were A=1,050, K=310 and L=320? Compute the equilibrium wage and capital rental rate in year 2020. Pick the closest value.

The wage is 508 and the rental rate is 522. Compared to 2010, the wage has fallen by about 3% and the capital rental rate has increased by about 10%.

The wage is 942 and the rental rate 108. Compared to 2010, the wage has increased by about 5% and the capital rental rate by about 8%.

The wage is 615 and the rental rate 462. Compared to 2010, the wage has increased by about 8% and the capital rental rate has decreased by about 5%.

The wage is 102 and the rental rate is 948. Compared to 2010, the wage has increased by about 2% and the capital rental rate by about 5%.

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