Suppose that the production function is given by Y = A K1/5L4/5. a. If A = 1,

Question:

Suppose that the production function is given by Y = A K1/5L4/5.
a. If A = 1, K = 10,000, and L = 10,000, what is real GDP?
b. The demand for labor in this economy is given by MPL= (4/5) AK1/5 ÷ L1/5. Find the real wage.
c. The demand for capital in this economy is given by MPK = (1/5) AL4/5 ÷ K 4/5. Find the real rental cost of capital.
d. Graph the relationship between the production function and the labor and capital markets.