Throughout the Text, a Simplifying Assumption Was Made in the Production

question 55

Essay

Throughout the text, a simplifying assumption was made in the production function model of economic growth: the capital share, $\alpha$ , is set equal to one-third. But this is not necessarily the case; indeed, $\alpha$ can be any number greater than zero and less than one. Consider two economies, H and L, with different capital shares, $\alpha$ _H $\gt$ $\alpha$ _L. Which country will get more output for each unit of capital added? Explain.

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Definitions:

Bailee

An individual or entity given temporary custody of someone else's property under a bailment agreement.

Liability

The state of being legally responsible for something, often referring to the obligation to repay debts or to compensate for loss or damage.

Professional Bailee

A person or entity specialized in the custody or management of others' property, often for a fee.

Warehouse Company

A warehouse company specializes in storing goods and merchandise in large buildings for manufacturers, importers, exporters, wholesalers, or logistic businesses.