Suppose the payments to capital and labor are (w*L*)/Y* = 2/3 and (r*K*)/Y*= 1/3, respectively. One implication of this result is that ________ and profits are ________.
A) ; positive
B) ; equal to zero
C) ; negative
D) ; equal to zero
E) ; negative

Question

Suppose the payments to capital and labor are (w*L*)/Y* = 2/3 and (r*K*)/Y*= 1/3, respectively. One implication of this result is that ________ and profits are ________.
A) ; positive 
B) ; equal to zero 
C) ; negative 
D) ; equal to zero 
E) ; negative

Quizplus · Accepted Answer

The payments to capital and labor add up to the total output (Y*), therefore, there are no profits left. Therefore, the answer is B, profits are equal to zero.

Suppose the Payments to Capital and Labor Are (W*L*)/Y* =

Suppose the Payments to Capital and Labor Are (WL)/Y* =