Production Function. Consider the Cobb-Douglas production function discussed in class: F(K, L) = AK^1/3 L^2/3. Suppose that parameters are initially A = 1, K = 150, and L = 10. d) Suppose that the quantity of labor L doubles. Calculate Y, w, r, Y/L, and K/L. Com- ment on how and why these numbers changed relative to (c) and why they did so. E) Suppose that the quantity of capital K doubles as well. (So now both K and L are twice their previous value). Calculate Y, w, r, Y/L, and K/L. Comment on how these numbers changed relative to both their initial values, and their values in (d)
Production Function. Consider the Cobb-Douglas production function discussed in class: F(K, L) = AK^1/3 L^2/3. Suppose that parameters are initially A = 1, K = 150, and L = 10. d) Suppose that the quantity of labor L doubles. Calculate Y, w, r, Y/L, and K/L. Com- ment on how and why these numbers changed relative to (c) and why they did so. E) Suppose that the quantity of capital K doubles as well. (So now both K and L are twice their previous value). Calculate Y, w, r, Y/L, and K/L. Comment on how these numbers changed relative to both their initial values, and their values in (d)
Chapter11: Profit Maximization
Section: Chapter Questions
Problem 11.14P
Related questions
Question
Production Function. Consider the Cobb-Douglas production function discussed in class:
F(K, L) = AK^1/3 L^2/3. Suppose that parameters are initially A = 1, K = 150, and L = 10.
d) Suppose that the quantity of labor L doubles. Calculate Y, w, r, Y/L, and K/L. Com-
ment on how and why these numbers changed relative to (c) and why they did so.
E) Suppose that the quantity of capital K doubles as well. (So now both K and L are
twice their previous value). Calculate Y, w, r, Y/L, and K/L. Comment on how these
numbers changed relative to both their initial values, and their values in (d).
Expert Solution
Step 1
Given;
Production function;
where;
A= 1
K= 150
L= 10
Wages and rent:-
Output per labor:-
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Microeconomics: Principles & Policy
Economics
ISBN:
9781337794992
Author:
William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Microeconomics: Principles & Policy
Economics
ISBN:
9781337794992
Author:
William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:
Cengage Learning