HOMEWORK ASSIGNMENT 2 Due: Mon 10/04/2010 1.Consider the following production function: Y = 10 K0.3L0.7, where Y represents output, K represent capital, and L represents labor. a)Compute expressions for the marginal products of labor and of capital b)Do workers or capitalists (owners of capital) end up getting paid the larger share of total output? What fraction of total output gets paid to workers? c)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? d)Suppose that a hurricane destroyed large amount of capital stock in the U.S. Discuss the effect on the real wage, the real rental price of capital, total income of labor, and total income of capital. 2.Congress is debating whether to implement a tax cut. Suppose you are a policy analyst
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