A firm's production function is initially Q = KL, with MPK = 0.5(L/K) and MPL = 0.5(K/L).

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A firm's production function is initially Q = KL, with MPK = 0.5(√L/√K) and MPL = 0.5(√K/√L). Over time, the production function changes to Q = K√L, with MPK = √L and MPL = 0.5(K/√L).
a) Verify that this change represents technological progress.
b) Is this change labor saving, capital saving, or neutral?
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Microeconomics

ISBN: 978-0073375854

2nd edition

Authors: Douglas Bernheim, Michael Whinston

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