5. Assume that an aggregate Cobb-Douglas production function of the form Y, =A,K, 42% describes the macroeconomy of a gi

[answerhappygod]

5 Assume That An Aggregate Cobb Douglas Production Function Of The Form Y A K 42 Describes The Macroeconomy Of A Gi 1 (119.58 KiB) Viewed 37 times

5. Assume that an aggregate Cobb-Douglas production function of the form Y, =A,K, 42% describes the macroeconomy of a given country. (a) Find the marginal product of capital. What is it equal to under perfect competition in the capital market? Interpret. (10 marks) (b) Find the marginal product of labour. What is it equal to under perfect competition in the labour market? Interpret. (10 marks) (c) Does this economy display diminishing returns to scale: why-or why not? (15 marks) (d) Compute the macroeconomy's output in some year t = 2014 for a value for the capital stock equal to 350 billions of monetary units, working population of 10 million and total annual hours of 2000 supplied by each worker. (15 marks) (e) Now assume that the aggregate production function is Y, =A, KO:25 20:45. Find the marginal product of capital and explain , how it differs from that in (a). Interpret. (10 marks) (f) Find the marginal product of labour and explain how it differs from that in (b). Interpret. (10 marks) (g) Does this economy display diminishing returns to scale: why – or why not? (15 marks) (h) Compute again the macroeconomy's output in the same year t = 2014 for the same data as in (d), but now with the changed production function input shares, as in (e). Is it higher or lower than the output in (d) - and why? (15 marks)