Question

which casr increase the marginal product of labor when the production function is a cobb-douglas type and require both capital and labor as factors of production?

a increase in the capital

b, increase in labor

c, increase in the capitsl income share

d, all above

Answer 1

Ans.- In general, production function is a specification of how the quantity of output behaves as a function of the inputs used in production this consept can be applied at the level of individual firms, industries, or intire economics.

since, we're doing macro economics we will be considering an aggragate production function applying, at the economy-wide level.

We've shown that the Cobb-Douglas function gives diminishing returns to both labor and capital when each factor is varied in isolation but what happens if we change both K and N in the same proporation.-

Suppose an economy in an initial state has inputs Ko and No and produces output Yo-

Yo =AKo^aNo^1-a

^{Now suppose we scale the inputs by some common factor. We'll then have inputs K₁=K₀ and N₁=N₀ and will produce output Y₁. The question is how does Y₁ related to Y₀ -}

^{Y₁ =AK₁N₁}

_{=A(K0)a (N0)}

_{=A K0a-1 N0}

_-=Y0

_{SO if we scale both inputs by a common factor the effect is to scale the output by that same factor}