Consider a Cobb-Douglas production function with constant returns to scale where the share of capital income (α) is 1/3 and L=K=100. In addition, A=1. Keeping technology and capital stock unchanged, an increase in labour input by 6% leads to approximately which of the following?

Question

Answer

no change in the labour income share of GDP

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4% increase in average labour productivity

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2% increase in output

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2% increase in the marginal product of labour

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6% increase in output due to constant returns to scale property

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Consider a Cobb-Douglas production function with constant returns to scale where...

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