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Consider two competitive economies that have the same quantities of labor (L = 200) and capital (K = 200), and the same technology (A =
Consider two competitive economies that have the same quantities of labor (L = 200) and capital (K = 200), and the same technology (A = 20). The economies of the countries are described by the following Cobb-Douglas production functions:
North Economy: Y= A L^0.40 K^0.60
South Economy: Y = A L^.60 K^.40
In which economy is the marginal product of capital larger?
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