Answer to Question #66850 in Macroeconomics for jane
Consider an economy described by the aggregate production function
Y = F(K,L) = K^0.3L^0.7
(a) Does this production function have constant returns to scale (CRS)? Why?
(b) What is the marginal product of capital (MPK)?
(c) What is the marginal product of labor (MPL)?
(d) Use your answers in (b) and (c) above to show that this production function displays
diminishing marginal product (DMP).
(e) Are K and L "complements"? Explain in some detail.
(f) What is the capital share?
(g) When capital per worker rises, what happen to labor share of national income?