Consider a Production Function for an Economy

question 126

Essay

Consider a production function for an economy:
Y = 20 (L.5K.4N.1)
where L is labor, K is capital, and N is land. In this economy the factors of production are in fixed supply with L = 100, K = 100, and N = 100.
a. What is the level of output in this country?
b. Does this production function exhibit constant returns to scale. Demonstrate by example. c. If the economy is competitive so that factors of production are paid the value of their marginal products, what is the share of total income that will go to land?

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Definitions:

Antitrust Liability

Legal responsibility incurred due to violating antitrust laws, which aim to promote competition and protect consumers from monopolistic practices.

Trade and Commerce

Activities involving the exchange of goods and services between businesses or entities across geographical boundaries.

Robinson-Patman Act

A United States federal law designed to prevent anticompetitive practices by producers, specifically price discrimination.

Secondary Level Price Discrimination

A pricing strategy where prices are varied based on some attribute of the purchaser or the purchase context, not directly on production costs or primary market segments.