Essay
Assume that the production function is given by Y = AK0.5L0.5, where Y is GDP, K is capital stock, and L is labour. The parameter A is equal to 10. Assume also that capital is 100, labour is 400, and both capital and labour are paid for their marginal products.
a.What is Y?
b.What is the real wage of labour?
c.What is the real rental price of capital (the amount of output paid per unit of capital)?
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a.2,000
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b....
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