Consider two competitive economies that have the same quantities of labor

1. Consider two competitive economies that have the same quantities of labor (L = 400) and capital (K = 400), and the same technology (A = 100). The economies of the countries are described by the following Cobb-Douglas production functions:


Economy E: Y = 10L2/3K1/3
Economy W: Y = 10L1/3K2/3

1. Which economy has the larger total production? ____________

2. What is the total production for the larger economy ________

3. In which economy is the marginal product of labor larger?

4. What is the Marginal Product for the economy which has the larger Marginal Product of labor______

5. In which economy is the real wage larger? _________________

6. In which economy is the labor’s share of income larger? __________________

7. How much is the total labor share for the economy with the larger labor share ______________

Additional Requirements