Production Function Flashcards

1
Q

Cobb Douglas - Y=

A

AK^(1/3)L^(2/3)

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2
Q

Capital Hiring Rule:

A

1/3 x Y/K = r

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3
Q

Labour Hiring Rule:

A

2/3 x Y/L = w

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4
Q

Capital Hiring Rule in equilibrium:

A

r* = 1/3.A̅.(L̅/K̅)^2/3

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5
Q

Labour Hiring Rule in equilibrium:

A

w* = 2/3.A̅.(K̅/L̅)1/3

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6
Q

r* is proportional to…

A

Y/K by 1/3

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7
Q

w* is proportional to…

A

Y/L by 2/3

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8
Q

TFP measures…

A

how efficient countries are using their factor inputs

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9
Q

A lower TFP means…

A

for any given level of capital per person, workers produce less output than a country with a higher TFP

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10
Q

TFP Determinants:

A

Human Capital, Technology, Institutions (Separation of powers, property rights), Financial system, Natural resource endowment, Location, Health, Monopolies,

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11
Q

Y = K + K^(1/3)L^(1/3) exhibits…

A

Decreasing returns to scale

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12
Q

Y = K + L exhibits…

A

Constant returns to scale

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13
Q

Y = K^(1/3)L^(2/3) + A exhibits…

A

Decreasing returns to scale

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14
Q

Y = K^(1/3)L^(2/3) - A exhibits…

A

Increasing returns to scale

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15
Q

Y = AK^(3/4)L^(1/4) - y =

A

y = A(K/L)^(3/4)

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