Intermediate Macroeconomics Homework Question
Answer the following questions given the following Cobb-Douglas production function Y = AK^0.4L^0.6.
- Show whether the Cobb-Douglas production function has increasing, constant, or decreasing returns to scale.
- Derive expressions for marginal product of labor (MPL) and marginal product of capital (MPK).
- Show that the real wage and the real rental rate are proportional to average product of labor and average product of capital, respectively.
- Show that the share of capital income to total income is 0.4 and that the share of labor income to total income is 0.6.
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