Assume That the Production Function Is Cobb-Douglas with Parameter α

question 90

Multiple Choice

Assume that the production function is Cobb-Douglas with parameter α = 0.3. In the neoclassical model, if the labor force increases by 10 percent, then output:

• A)increases by about 10 percent.
• B)increases by about 7 percent.
• C)increases by about 3 percent.
• D)does not increase since the new workers are unemployed.