Assume That a Competitive Economy Can Be Described by a Constant

question 34

Essay

Assume that a competitive economy can be described by a constant returns to scale (Cobb- Douglas) production function and all factors of production are fully employed. Holding other factors constant, including the quantity of capital and technology, carefully explain how a one-time, 10 percent increase in the quantity of labor (perhaps the result of a special immigration policy) will change each of the following:
a.the level of output produced;
b.the real wage of labor;
c.the real rental price of capital;
d.labor's share of total income.

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Definitions:

Commander-In-Chief

The supreme leader of the armed forces within a country, often held by the president or monarch, responsible for military decision making.

Continental Army

The army raised by the Second Continental Congress in 1775, under the command of General George Washington, to fight the British in the American Revolutionary War.

George Washington

The first President of the United States, serving from 1789 to 1797, and a key figure in the nation's founding and the Revolutionary War.

Revolutionary Ideal

A guiding principle or goal that drives revolutionary movements, often rooted in desires for political, social, or economic change.