Assume That the Production Function Is Given by Y =

question 111

Essay

Assume that the production function is given by Y = AK0.5L0.5, where Y is GDP, K is capital stock, and L is labor. The parameter A is equal to 10. Assume also that capital is 100, labor is 400, and both capital and labor are paid their marginal products.
a.What is Y?
b.What is the real wage of labor?
c.What is the real rental price of capital (the amount of output paid per unit of capital)?

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