Suppose the economy's production function is Y = AK⁰.³ᴺ⁰.⁷.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

The production function is Y = AK^0.3N^0.7. If K = 2000 and N = 100, then Y = A(2000)^0.3(100)^0.7. Given that Y = 2000 when K = 1000 and N = 50, we can find A by solving 2000 = A(1000)^0.3(50)^0.7. Once A is found, substitute it back to find Y for the new values of K and N, which results in Y = 4000.

Suppose the Economy's Production Function Is Y = AK⁰