Intermediate Macroeconomics

ECN 4020 Homework #2
This homework is due at the start of class on September 16, 2014. Please complete all problems and show
work for full credit.

1. Do the following production functions exhibit increasing, constant, or decreasing returns to scale:

a. F(K, L) = K1/2L1/3

b. F(K,L) = K+L

c. F(K,L) = K + L2

d. F(K,L) = K“L1‘“ + 7

2. Consider the Cobb-Douglass production function discussed in class, Y = AK“L1‘“. Show that the
marginal product of labor is positive and decreasing.

3. The following table shows relative capital per person and per capita GDP for a number of countries
from 2007 based on 2005 dollars. The purpose of this exercise is to compute the growth
accounting exercise discussed in class by filling in the missing columns of the table to compare
countries relative to the US. For the first two empty columns fill in the relative value of capital per
person and per capita GDP relative to the US. The next column asks you to write down the
predicted per capita GDP relative to the US based on the difference in capital per person if there
were no differences in GDP. Finally, the final column asks you to compute the implied difference
in productivity needed to match the data. Comment on the general results that you find.

Country Capital Per Per capita Capital GDP Predicted Implied TFP
Person GDP relative to relative to y* to match
US US Data

United 135,877 42,877 1.00 1.00 1.00 1.00

States

France 109,023 29,633

Mexico 33,168 11,204

Kenya 2,379 2,025

PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT ??