What Does the Cobb-Douglas Production Function Assume About the Input

question 56

Multiple Choice

What does the Cobb-Douglas production function assume about the input shares in the economy?

• A)the capital share is smaller than the labor share of income
• B)both the capital and labor shares of income are positive
• C)both the capital and labor shares of income remain relatively constant over time
• D)all of the above
• E)none of the above

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Definitions:

Cost of Capital

The rate of return a company must earn on its investments to maintain its market value and attract funds, including the cost of equity and debt financing.

Cash Inflows

The total amount of money coming into a business from various sources, including sales, investments, and financing activities.

Exchange Rate

The rate at which one currency can be exchanged for another, often used in international trade and investment.

Triangle Arbitrage

An arbitrage strategy that exploits disparities in currency exchange rates in three different markets to make a risk-free profit.