Consider the following simplified economy described by a Cobb-Douglas production function with three factors of production: “K” is physical capital (the number of machines), “L” is labor (the number of workers), and “H” is human capital (the number of college degrees among the workers). “A” measures the level of technology and efficiency in the economy, and “Y” is real GDP. The aggregate production function is:

Y= A(K)^(1/3)(L)^(1/3)(H)^(1/3)

A. Derive an expression for the marginal product of labor. How does an increase in the amount of human capital affect the marginal product of labor (MPL)?
B. Derive an expression for the marginal product of human capital (MPH). How does an increase in the amount of human capital affect the marginal product of human capital?
C. An unskilled worker earns the marginal product of labor, whereas a skilled worker earns the marginal product of labor plus the marginal product of human capital. Using your answers in Parts A and B above, find the ratio of the skilled wage rate to the unskilled wage rate.
D. Some people advocate government funding of college scholarships as a way of creating a more egalitarian (more equal) society. Others argue that scholarships help only those who are able to go to college. Does your answer to Part C shed light on this debate? Based on this model, which side is correct? Explain.

  1. 👍
  2. 👎
  3. 👁

Respond to this Question

First Name

Your Response

Similar Questions

  1. Calculus

    A company manufactures x units of one item and y units of another. The total cost in dollars, C, of producing these two items is approximated by the function C=7x^2+xy+1y^2+600. A) If the production quota for the total number of

  2. Government US

    2. Which of the following statements best describes the relationship today between government and the economy in the United States? a. The economy is largely self-regulating. b. The government subsidizes economic interests but

  3. history

    Excerpt from Douglas’s speech: "I believe that the Union can only be preserved by maintaining inviolate the Constitution of the United States as our fathers have made it. That Constitution guarantees to the people of every State

  4. Math

    The revenue function for a production by a theater group is R(t)= -50t^2+300t, where t is the ticket price in dollars. The cost function for the production is C(t)= 600-50t. Determine the ticket price that will allow the

  1. Geography (Ms. Sue)

    1). What three factors have contributed to the success of the American economy? 2). What are the geographic origins of some American musical styles? 3). What invention made life in the suburbs possible? My answers to these

  2. Social Studies

    Which type of economic system has the highest level of government control? A. traditional economy B. market economy C. command economy D. mixed economy

  3. American Government

    Check my answers please 1. Which of the following describe the role of an entrepreneur in a capitalist economic system? (I need to select 2) A. Someone who combines the factors of production into a business B. Someone who decides

  4. History

    Sole proprietorships produce only a small fraction of annual sales in the U.S. economy because sole proprietorships A. are the most heavily taxed businesses. B. mainly are small businesses. C. use the factors of production less

  1. Economics

    A Cobb-Douglas production function for new company is given by  f(x,y)  50x 2 5 y 3 5 where x represents the units of labor and y represents the units of capital. Suppose units of Labor and capital cost $100 and $200 each

  2. macroeconomics

    Describe the four factors of production: land, labor, capital, and entrepreneurship. Pick a product with which you are familiar, and explain how these four factors of production were used to transform raw materials into the

  3. math

    how often does a leap year occur? what are al the prime numbers less then 12. what is the eighth multiple of 32? is the last digit of the multiples if 4 odd or even? what are the six factors of 12? what are the factors of 16. two

  4. principles of macroeconomics

    It is possible for an economy to increase its production of computers and, at the same time, to increase its production of cars if the economy a. moves downward and to the right along its production possibilities frontier and the

You can view more similar questions or ask a new question.