Suppose the economy's production function is Y = AK^0.3N^0.7. If K = 1000 and N = 50, then Y = 2000. What is Y if K = 2000 and N = 100? A) 4000 B) 3500 C) 3400 D) 3000

Question

Quizplus · Accepted Answer

Given, Y = AK^0.3N^0.7 When K = 1000 and N = 50, Y = 2000 2000 = A(1000)(50)1(1)1(0.3)(1)(50)0.7(1)(0.5) = A(1,500) A = 2000/1500 = 4/3 Using the same formula and substituting K = 2000 and N = 100 Y = (4/3)(2000)(1)1(0.3)(1)(100)0.7(1)(1) = 4000 Therefore, Y is 4000 when K = 2000 and N = 100. The correct answer is A) 4000.

Suppose the Economy's Production Function Is Y = AK0

Suppose the Economy's Production Function Is Y = AK⁰