Suppose an Economy Uses Only Two Inputs in Production, Capital

question 145

Essay

Suppose an economy uses only two inputs in production, capital and labour. The following table describes a production function, where y stands for output per worker and k is capital per worker.
a.Draw approximately this production function with y on the vertical axis.
b.Show that this production function exhibits diminishing returns to scale.
c.Suppose there are two countries, A and B. The economies of the two countries can be described by this production function. If Country A has initially a capital-labour ratio k = 0.167 and Country B has k = 0.412, show that an equal increase in capital produces more extra output in country A than in Country B.

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Definitions:

Flush()

A method often used to clear or empty a buffer in programming, ensuring that all output operations are performed immediately.

Newline Sequence

A character or sequence of characters used to represent the end of a line of text and the start of a new line.

'\n'

A character used in programming to represent a newline, signaling the end of a line of text.

Polymorphism

In object-oriented programming, the ability of different objects to respond to the same function call in different ways depending on their data types or classes.