Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Can somebody help me on this 30 Consider a firm whose production function is given by the Cobb-Douglas function y = zKa N1-a where z

Can somebody help me on this

image text in transcribed
30 Consider a firm whose production function is given by the Cobb-Douglas function y = zKa N1-a where z is is productivity, K is the fixed amount of capital available to the firm, N is labor, and a E (0, 1) is a constant. a. Show mathematically that this production function exhibits constant returns to scale. b. We define the labor share as the part of output paid out to labor: labor share = wN/y, where w is the real wage. Solve the firm's optimization problem, and then use that to show that the labor share equals 1-a. c. Write a short paragraph discussing what has been happening to the labor share in U.S. data in recent decades and why. Now suppose that a technological innovation increases the firm's productivity by 10%. d. Show how this change affects output in the diagram that relates the firm's output to the amount of labor it employs. Derive mathematically the resulting change in the marginal product of labor. e. At the given wage rate, explain whether the firm's demand for labor will increase, decrease, or remain the same in response to this innovation

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Business Statistics for Contemporary Decision Making

Authors: Ken Black

6th Edition

978-0470409015, 9780470559062, 470409010, 470559063, 978-0470910184

More Books

Students also viewed these Economics questions