Consider the simple (one-period) production model. The production
function is Cobb-Douglas, exhibits constant returns to scale, and the exponent on capital equals 0.70. Suppose also that all households in the economy are composed of two adults so that household income is the sum of the wages received by both adults in the family. Suppose also that all households have young children.
In year 2019 (initial equilibrium), the economy's parameter values were A=500, K=600 and L=300? Compute the equilibrium wage and household income. Pick the correct statement below.
Household income will be roughly equal to 708.
Household income will be roughly equal to 488.
Household income will be roughly equal to 354.
Household income will be roughly equal to 250.
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