Exercise 15.30. Consider the model presented in Section 15.8. (1) Show that if capital and labor are
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Exercise 15.30. Consider the model presented in Section 15.8. (1) Show that if capital and labor are allocated in competitive markets, in general more than one technique will be used in equilibrium. [Hint: construct an example in which there are three ideas i = 1, 2 and 3, such that when only one can be used, it will be i = 1, but output can be increased by allocating some of labor and capital to ideas 2 and 3]. (2) * Show that in this case the exact aggregation result used in Section 15.8 does not apply.
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