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Consider an economy, where the price of labor is t , the price of capital is r t , and with the following production function:
Consider an economy, where the price of labor is t, the price of capital is rt, and with the following production function:
Yt=KtaNt1
Show that the income shares of capital and labor areYtrtKt= and YttNt=(1), respectively. Hint: Start with the profit maximization problem and then obtain the shares of income for each factor of production
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