Consider two competitive economies that have the same quantities of labor (L = 400) and capital (K = 400), and the same technology (A = 100). The economies of the countries are described by the following Cobb-Douglas production functions:
Economy E: Y = 10L2/3K1/3
Economy W: Y = 10L1/3K2/3
1. Which economy has the larger total production?
2. What is the total production for the larger economy
3. In which economy is the marginal product of labor larger?
4. What is the Marginal Product for the economy which has the larger Marginal Product of labor
5. In which economy is the real wage larger?
6. In which economy is the labor's share of income larger?
7. How much is the total labor share for the economy with the larger labor share.