Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Cobb-Douglas production function and the steady state. This problem is based on the material in the chapter appendix. Suppose that the economy's production function

The Cobb-Douglas production function and the steady state.

This problem is based on the material in the chapter appendix.

Suppose that the economy's production function is given by

Y = Ka N1-a

and assume that a = 1>3.

a. Is this production function characterized by constant returns

to scale? Explain.

b. Are there decreasing returns to capital?

c. Are there decreasing returns to labor?

d. Transform the production function into a relation between

output per worker and capital per worker.

e. For a given saving rate, s, and depreciation rate, d, give an

expression for capital per worker in the steady state.

f. Give an expression for output per worker in the steady state.

g. Solve for the steady-state level of output per worker when

s = 0.32 and d = 0.08.

h. Suppose that the depreciation rate remains constant

at d = 0.08, while the saving rate is reduced by half, to

s = 0.16. What is the new steady-state output per worker

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Classics In Game Theory

Authors: Harold William Kuhn

1st Edition

1400829151, 9781400829156

More Books

Students also viewed these Economics questions

Question

Is public relations a profession? Why or why not?

Answered: 1 week ago