1. Using the Cobb-Douglas production function:
Yt = AtKt1/3Lt2/3
If K = 27, L = 8 A = 2, and α = 1/3, what is the value of Y? (For K and L, round to the nearest whole number) ______
2. If Y = 300, L = 10, and α = 1/3, what is the marginal product of labor? ______
3. Using the values for Y and α above, if K = 900, what is the marginal product of capital? Express your answer as a percentage. _______
4. For the Cobb-Douglas production function, if α = 1/5, what would labor’s share of output be?________
5. For the Cobb-Douglas production function, if A = 2 and Y =100, what would Y be if A increases to a value of 3?
______
(1) Plugging in given values,
Y = 2 x (27)1/3 x (8)2/3 = 2 x 3 x 4 = 24
(2) Plugging in given values,
300 = 2 x (K)1/3 x (10)2/3
150 = (K)1/3 x (10)2/3
Taking (3/2)-th root on both sides,
(150)3/2 = (K)1/2 x 10
Squaring,
(150)3 = K x 100
K = (150 x 150 x 150) / 100 = 33,750
MPL = Y/L = 2 x (2/3) x (K/L)1/3 = (4/3) x (33,750 / 10)1/3 = (4/3) x (3,375)1/3 = (4/3) x 15 = 20
(3) Plugging in given values,
300 = 2 x (900)1/3 x (L)2/3
150 = (900)1/3 x (L)2/3
Taking (3/2)-th root on both sides,
(150)3/2 = (900)1/2 x L
Squaring,
(150)3 = L2 x 900
L2 = (150 x 150 x 150) / 900 = 3,750
L = 61.24
MPK = Y/K = 2 x (1/3) x (L/K)2/3 = (2/3) x (61.24 / 900)2/3 = (2/3) x (0.068)2/3 = (2/3) x 0.1667 = 0.1111 = 11.11%
NOTE: As per Answering Policy, first 3 questions are answered.
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