In the Cobb-Douglas production function, the closer capital's share of income is to 1:
A) the closer to a straight line is the production function.
B) the more concave the production function.
C) the more convex the production function.
D) the more labor is used in the production process.

Question

Quizplus · Accepted Answer

The Cobb-Douglas production function becomes linear as capital's share of income approaches 1, making the production function appear closer to a straight line. This is because the function is defined as Y = A * L^(1-α) * K^α, where L is labor, K is capital, A is total factor productivity, and α represents capital's share of output. As α approaches 1, the function relies almost entirely on capital, reducing the impact of labor and making the function linear in terms of capital.

In the Cobb-Douglas Production Function, the Closer Capital's Share of Income