Use b as the exponent for physical capital, and c as the exponent for human capital. Assume that b = 0.25 and c = 0.60. Further assume that per person income of a rich country is 10 times that of a poor country.
-Refer to the information above.What is the approximate value of the multiple of combined physical and human capital that the rich country must have in order to produce 10 times the output per person of the poor country?
A)1000
B)100
C)25
D)15

Question

Quizplus · Accepted Answer

Given b = 0.25 and c = 0.60, the production function can be represented as Y = K^b * H^c. To produce 10 times the output, the combined capital must satisfy the equation 10 = K^0.25 * H^0.60. Solving for the multiple of K and H yields a value that approximates to 15, considering the exponents sum to less than 1, indicating diminishing returns to scale.

Use B as the Exponent for Physical Capital, and C