Consider a Production Function for an Economy

question 100

Essay

Consider a production function for an economy:
Y = 20(L^.5K^.4N^.1)
where L is labor, K is capital, and N is land. In this economy the factors of production are in fixed supply with L = 100, K = 100, and N = 100. a. What is the level of output in this country?
b. Does this production function exhibit constant returns to scale. Demonstrate by example.
c. If the economy is competitive so that factors of production are paid the value of their marginal products, what is the share of total income will go to land?

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Definitions:

Social Desirability Bias

The tendency of respondents to answer questions in a manner that will be viewed favorably by others.

Honesty Survey

A method of collecting data which relies on the self-reported truthfulness of participants regarding sensitive or personal issues.

Experimenter Bias

A process where the scientists performing the research influence the results, intentionally or unintentionally, towards their expected outcome.

Control Group

In experiments, a group of subjects that does not receive the treatment being tested, used for comparative purposes against the experimental group.