If the parameter E of the Cobb-Douglas production function decreases
A) less output per worker can be produced for each possible value of the capital stock per worker.
B) more output per worker can be produced for each possible value of the capital stock per worker.
C) that the economy becomes more productive.
D) the value of capital per worker decreases.

Question

Quizplus · Accepted Answer

The parameter E in the Cobb-Douglas production function typically represents a factor related to efficiency or technology. A decrease in E would imply a reduction in the efficiency or effectiveness with which inputs (like labor and capital) are transformed into output, leading to less output per worker for each possible value of the capital stock per worker.

If the Parameter E of the Cobb-Douglas Production Function Decreases