The aggregate production function is Y = 6K^0.5L^0.5. If there are 100 units of capital and 25 units of labor, aggregate output is A) 131 units. B) 277 units. C) 300 units. D) 750 units.

Question

Quizplus · Accepted Answer

Substituting the given values for K and L into the production function, we get:
Y = 6(100)S1(25)U1P10.5S1S1P0LS1U1P10.5S1S1P0 = 6,000S1U1P10.5S1S1P0LS1U1P10.5S1S1P0
Simplifying, we get:
Y = 6,000S2U1P10.5S2P0.5
Substituting S2 = 1 (since there is no information given about the amount of land and materials), we get:
Y = 6,000U1P10.5
Substituting U = 25 (from above), we get:
Y = 6,000(25)1.5 = 300,000
Therefore, the answer is C.

The Aggregate Production Function Is Y = 6K0

The Aggregate Production Function Is Y = 6K⁰