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Consider a closed economy with two inputs, L and K, and a Cobb-Douglas production function Y = F(K, L) = KOL1- . Assume that that
Consider a closed economy with two inputs, L and K, and a Cobb-Douglas production function Y = F(K, L) = KOL1- . Assume that that the rate of return to capital r and wage rate w are equal to the marginal products of capital and labor, respectively. The relative factor prices w/r was initially 10, but after a wage increase it rose to w'/r'=11. The capital labor ratio (K/L) increases by .. percent
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