Given that all countries have the same Cobb-Douglas production function,i.e.Y/N = (K/N)b,where b = 0.5,then a ten-fold difference in per capita income requires a difference in capital per capita by a factor of
A)10.
B)100.
C)1000.
D)10,000.

Question

Quizplus · Accepted Answer

Given the Cobb-Douglas production function $Y/N = (K/N)^b$ with $b = 0.5$, to achieve a ten-fold difference in per capita income ($Y/N$), the capital per capita ($K/N$) must be squared (since $b = 0.5$). Therefore, a 100-fold increase in $K/N$ is required to achieve a ten-fold increase in $Y/N$.

Given That All Countries Have the Same Cobb-Douglas Production Function,i