Question

An economy has the production function Y = 0.4 (K + N1/4) In current period K=100...

An economy has the production function Y = 0.4 (K + N1/4)

In current period K=100 and N=100.

a. Graph the relationship between output and capital, holding labor constant at its current value. What is the MPK? Does the marginal productivity of capital diminish? (Use your Excel skills.)

b. Graph the relationship between output and labor, holding capital constant at its current value. Find the MPN for an increase of labor from 100 to 110. Compare this result with the MPN for an increase in labor from 110 to 120. Does the marginal productivity of labor diminish?

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