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Unformatted text preview: J Sonoma State University Department of Economics ECONOMICS 304 Florence Bouvet Assignment 2 Due Date: September 23 rd at the beginning of lecture I) Consider the following production function: Y = 40 K02 LOs, where Y represents output, K represent capital, and L represents labor. DCA.liC I b) Compute expressions for the marginal products of labor and of capital. Does the production function exhibit increasing, constant or decreasing returns to labor? Show your work. r=-; w z , v. ,\,?l_ fv\rL-;. ~ v c) Do workers or capitalists (owners of capital) end up getting paid the larger share of total output? What fraction of total output gets '0 to workers? d) Suppose that an increase in immigration into the U.S. increases the U.S. labor force. Discuss the effect on the real wage and the real rental price of capital. Would workers currently in the U.S. be happy about the immigration? How about the owners of U.S. factories?...
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This note was uploaded on 04/07/2011 for the course ECON 304 taught by Professor Eyler during the Fall '07 term at Sonoma.
- Fall '07