Assume That the Production Function Is Given by Y = $Y$

question 71

Essay

Assume that the production function is given by Y = AK^0.5L^0.5, where Y is GDP, K is capital stock, and L is labor. The parameter A is equal to 10. Assume also that capital is 100, labor is 400, and both capital and labor are paid for their marginal products. a. What is $Y$ ?
b. What is the real wage of labor?
c. What is the real rental price of capital (the amount of output paid per unit of capital)?

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Definitions:

Consigned Goods

Goods that are given to a third party to sell, but ownership remains with the supplier until sold.

Fiscal Period

A specific time frame used for accounting purposes, typically a year, over which a company reports its financial performance.

Freight

The charge paid for the transport of goods, usually based on the distance and weight of the merchandise being shipped.

Inventory Cost Flow

The process by which costs associated with inventory are accounted for, impacting how cost of goods sold and ending inventory are calculated.