Suppose an Economy Uses Only Two Inputs in Production: Capital

question 4

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:

Amplitude

The maximum extent of a vibration or oscillation, measured from the position of equilibrium, often used in the context of waves or sound.

Medial Geniculate Nucleus

Major thalamic region concerned with audition.

Cochlea

Inner ear structure containing the auditory receptor cells.

Inner Ear

A complex structure in the ear responsible for hearing and balance, comprising the cochlea, vestibule, and semicircular canals.