What does the Cobb-Douglas production function assume about the input shares in the economy?
A)the capital share is smaller than the labor share of income
B)both the capital and labor shares of income are positive
C)both the capital and labor shares of income remain relatively constant over time
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The Cobb-Douglas production function assumes that both capital and labor are essential inputs for producing output, and their shares in income are positive and relatively constant over time. The function also assumes that the elasticity of substitution between labor and capital is constant. Therefore, all three statements in options A, B, and C are correct, making option D the best choice.

What Does the Cobb-Douglas Production Function Assume About the Input