Short Question 2: (20 points) Consider the production model studied in Chapter 4. Final output in the economy is pro- duced using capital K and labor L. The production function is: Y = AK-1/6L4/5 Assume that the supply of all inputs are exogenous and equal to L and K. Perfectly compet itive firms are price-takers and choose how much capital and labor to demand by maximizing profits. Let w and r denote the wage and rental rate of one unit of labor and capital respec- tively. (c) Show that the solution for output per capita can be written as y = AK-1/5. Observed GDP per capita is 3 in this economy. Capital per person is 32. If A = 1, what does this model predict for GDP per person? Does this model over-predict or under-predict GDP? Show your working. (5 points)