Question
The marginal product of capital is given as: MP K = a*a 0 K (a-1) L b This can also be written as: MP K
The marginal product of capital is given as:
MPK = a*a0K(a-1)Lb
This can also be written as:
MPK = a*(a0KaLb)/K = a*y/K
Similarly, the marginal product of labor can be written as:
MPL = a*(a0KaLb)/L = b*y/L
The competitive profit-maximizing use of inputs calls for inputs to be paid the value of their marginal product. Let the price of y = $1 and a + b = 1.
show that if capital and labor were paid the value of their marginal product, that the total revenue is exhausted. That is, you want to show:
K*MPK + L*MPL = y(since the price of y is $1, it has been dropped)
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