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With the Cobb-Douglas production function Y=zK^1/4(N^d)^3/4, if both capital and labour increase by 70%, what will happen tooutput? A. Since the average value of the
With the Cobb-Douglas production function
Y=zK^1/4(N^d)^3/4, if both capital and labour increase by 70%, what will happen tooutput?
A.
Since the average value of the exponents in the production function is1/2, output will only increase by 35%.
B.
Output will increase by exactly 70%.
C.
Output will also increase by 70%, but only if z takes a value greater than 1.0.
D.
Because the production function exhibits diminishingreturns, output will increase by less than 70%.
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