If the Canadian Production Function Is Cobb-Douglas with Capital Share

question 84

Multiple Choice

If the Canadian production function is Cobb-Douglas with capital share 0.3,output growth is 3 percent per year,depreciation is 4 percent per year,and the capital-output ratio is 2.5,the saving rate that is consistent with steady-state growth is:

• A) 12.5 percent.
• B) 14 percent.
• C) 17.5 percent.
• D) 20 percent.

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Definitions:

Marginal Cost

The additional cost incurred to produce one more unit of a good or service.

Variable Cost Curve

A graphical representation that shows how total variable costs change with variations in output volume, helping firms visualize cost dynamics related to production levels.

Fixed Labor Cost

Expenses that do not change with the level of production or sales, such as salaries that must be paid regardless of the company's level of output.

Salaried Manager

A manager who is paid a fixed annual amount rather than an hourly wage, often receiving benefits such as healthcare.