Answer Happy

Country A and country B both have the production function Y = k1/3L2/3 (a) Does this production function have constant returns to scale? Explain. (b) What is the per-worker production function, (c) Assume that neither country experiences population growth or technological progress and that 20 percent of capital depreciates each year. Assume further that country A saves 10 percent of output each year and country B saves 30 percent of output each year. Using your answer from part (b) and the steady-state condition that investment equals depreciation, find the steady-state level capital per worker for each country. Then find the steady-state levels of income per worker and consumption per worker. (d) Suppose that both countries start off with a capital stock per worker of 1. What are the levels of income per worker and consumption per worker?