Consider the Cobb-Douglas Production Function F(L,K)= AL^αK^β

question 65

Multiple Choice

Consider the Cobb-Douglas production function F(L,K) = AL^αK^β.Which of the following statements is true?

• A) Increases in α increase labor's productivity and raise MRTS_LK.
• B) Decreases in α increase labor's productivity and raise MRTS_LK.
• C) Increases in α increase labor's productivity and lower MRTS_LK.
• D) Changes in α will not affect MRTS_LK.

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Definitions:

Affect

The experience of feeling or emotion, which can influence an individual's perception and behavior.

Epidemic

A widespread outbreak of an infectious disease in a community at a particular time.

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A phrase or expression that has a figurative, sometimes literal, meaning different from the meanings of the individual words.

Preoccupied

Absorbed in thought; engrossed or distracted by something, resulting in a lack of attention to other matters.