Question
(a) Show that, when the production function is Cobb-Douglas (for simplicity, as- sume that there are only two inputs: Y = F(K, L) =
(a) Show that, when the production function is Cobb-Douglas (for simplicity, as- sume that there are only two inputs: Y = F(K, L) = KaL, with a > 0 and B> 0), constant returns to scale and diminishing marginal returns (to capital and labor here) are equivalent. Note: to show that AB, one must show that A B (if state- ment A holds then B holds too) and B A (conversely). (b) What is the main implication of diminishing marginal returns in the Solow model? Explain.
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Introductory Statistics
Authors: Prem S. Mann
8th Edition
9781118473986, 470904100, 1118473981, 978-0470904107
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