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:

Trade-In Allowance

The value credited to the purchaser when they trade in a used item towards the purchase of a new item.

Machinery

Mechanical devices or equipment that perform various tasks on a job site, in a manufacturing or production environment.

Trade-In Allowance

The amount credited to a buyer for the value of a traded item towards the purchase of a new item.

Accumulated Depreciation

The aggregate depreciation cost allocated to a fixed asset since its initial purchase.