An economy's production function is Y = AK0.3L0.7, and the economy's total output in equilibrium is $90 billion. Total capital income in this economy is ________.
A) $27 billion
B) $30 billion
C) $21 billion
D) $70 billion
E) none of the above

Question

Quizplus · Accepted Answer

The share of capital income in the production function Y = AK^0.3L^0.7 is given by the exponent on capital, which is 0.3. Therefore, total capital income is 0.3 * $90 billion = $27 billion.

An Economy's Production Function Is Y = AK0