Answer to Question #54908 in Macroeconomics for jennifer

Question #54908
Assume that the world works according to the Classical model. There are two countries in the world, Country 1 and Country 2, that each produce output according to the following CobbDouglas production function: Y = 5(K^0.4L^0.6)  In addition to having the same production function, Country 1 and Country 2 are also identical in terms of hours of labor supplied by workers (the stock of labor), stock of capital, real wage and real rental rate of capital. Assume that Country 1 can suddenly benefit from a significant improvement in technology, which changes its production function to Y = 10(K^0.4L^0.6) a)How will the MP L change in the two countries when the production function in Country 1 changes? Recall that with a Cobb-Douglas production function
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