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Question 3. (17 points) Suppose that the production function is Y = K^ 0.2 L^ 0.8 in an economy, when K is capital and L

Question 3. (17 points) Suppose that the production function is Y = K^ 0.2 L^ 0.8 in an economy, when K is capital and L is labour.

a. (11 points) What fractions of income do capital and labour receive? Explain your answer.

b. (6 points) How much is economic profit? Explain your answer.

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