Assume an Endogenous Growth Model with Labor Augmenting Technology

question 31

Multiple Choice

Assume an endogenous growth model with labor augmenting technology.The production function is Y = F(K,AN) with A = 2(K/N) , so y = 2k.If the savings rate is s = 0.05 and there is neither population growth nor depreciation of capital, what is the growth rate of output?

• A)0%
• B)2)5%
• C)5%
• D)10%
• E)it cannot be determined

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Definitions:

Marginal Revenue

Marginal Revenue is the additional income acquired from selling one more unit of a product or service, crucial for determining optimal production levels.

Cost Function

A mathematical relationship that describes how production costs change with variations in output level.

Reaction Curves

Graphs showing how one firm’s optimal output decision responds to quantities of output by competing firms in a market.

Simultaneous Equations

A set of equations containing multiple variables that are all solved together.