Consider Two Competitive Economies That Have the Same Quantities of Labour

question 51

Essay

Consider two competitive economies that have the same quantities of labour (L = 400) and capital (K = 400), as well as the same technology (A = 100). The economies of the countries are described by the following Cobb-Douglas production functions:
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North Economy: Y = A L^.3K^.7
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South Economy: Y = A L^.7K^.3
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a.Which economy has the larger total production? Explain.
b.In which economy is the marginal product of labour larger? Explain.
c.In which economy is the real wage larger? Explain.
d.In which economy is labour's share of income larger? Explain.​

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Definitions:

Gonadal Tissues

The tissues that compose the gonads, which are the primary reproductive organs (ovaries in females and testes in males), responsible for producing gametes and hormones.

Early Blood Cells

Precursors to mature blood cells, formed in the bone marrow from hematopoietic stem cells.

Polar Bodies

Polar bodies are small cells that are formed as byproducts during the oocyte (egg cell) maturation process, involved in the division of cytoplasm.

Genetic Material

The molecules (DNA and RNA) within cells that carry genetic information necessary for replication, development, and functioning.