For the production function Y/N = K/N)^0.⁷and a capital stock per worker ratio of $3,000,000 in country A, what is the approximate difference in capital stock per worker ratios between countries A and B if, in country B,^Y/N⁾A ⁼¹⁵^Y/B⁾B^?

Question

Quizplus · Accepted Answer

The production function is Y/N = (K/N)^0.7. Given that (Y/N)_A = 15(Y/N)_B, we can set up the equation (K/N)_A^0.7 = 15(K/N)_B^0.7. Solving for (K/N)_B, we find that (K/N)_B = (K/N)_A / 15^(1/0.7). With (K/N)_A = 3,000,000, the difference is approximately 50.

For the Production Function Y/N = K/N)0

For the Production Function Y/N = K/N)⁰