Consider two competitive economies that have the same quantities of capital (K = 400) and labor (L
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Question:
Consider two competitive economies that have the same quantities of capital (K = 400) and labor (L = 400), and the same technology (A = 100). The economies of the countries are described by the following Cobb-Douglas production functions:
North Economy:Y=A K0.7L0.3
South Economy:Y=A K0.3L0.7
- Which economy has the larger total production, if any? Use calculations to support your answer. (8 points)
- In which economy is the marginal product of labor larger? Use calculations to support your answer. (8 points)
- In which economy is the real wage larger? Explain. (4.5 points)
- In which economy is capital's share of income larger? Explain. (4.5 points)
Please show all work.
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