Assume that an economy is described by a Cobb-Douglas production function. If average labour productivity is growing rapidly:
A)labour's share of total income will be increasing.
B)labour's share of total income will be decreasing.
C)workers will experience high rates of real wage growth.
D)economic profits will be positive.

Question

Quizplus · Accepted Answer

In a Cobb-Douglas production function, if average labor productivity is growing rapidly, it typically leads to high rates of real wage growth for workers, as productivity gains are often shared with labor in the form of higher wages.

Assume That an Economy Is Described by a Cobb-Douglas Production