Assume That an Economy Is Described by a Cobb-Douglas Production

question 108

Multiple Choice

Assume that an economy is described by a Cobb-Douglas production function. If average labour productivity is growing rapidly:

• A)labour's share of total income will be increasing.
• B)labour's share of total income will be decreasing.
• C)workers will experience high rates of real wage growth.
• D)economic profits will be positive.

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Definitions:

Sellers

Individuals or entities that offer goods or services for sale in the market, playing a key role in determining the supply conditions.

Surplus

When the quantity of a good or service supplied exceeds the quantity demanded at the current price.

Quantity Demanded

The overall volume of a good or service that consumers are ready and capable of purchasing at a particular price.

Production Technique

A method or process used in the creation of goods or services, often involving tools, machinery, and technology.