ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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answer questions a and b please 

3. Work It Out • Consider an economy described by the production function Y = F(K, L) = K0.4 L0.6 a. What is the per-worker production function? b. Assuming no population growth or technological progress, find the steady-state capital stock per worker, output per worker, and consumption per worker as a function of the saving and depreciation rates. c. Assume that the depreciation rate is 15 percent per year. Make a table showing steady-state capital per worker, output per worker, and consumption per worker for saving rates of 0 percent, 10 percent, 20 percent, 30 percent, and so on. (You might find it easiest to use a spreadsheet.) What saving rate maximizes output per worker? What saving rate maximizes consumption per worker? d. Use information from Chapter 3 to find the marginal product of capital. Add to your table from part (c) the marginal product of capital net of depreciation for each of the saving rates. What does your table show about the relationship between the net marginal product of capital and steady-state consumption?
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Transcribed Image Text:3. Work It Out • Consider an economy described by the production function Y = F(K, L) = K0.4 L0.6 a. What is the per-worker production function? b. Assuming no population growth or technological progress, find the steady-state capital stock per worker, output per worker, and consumption per worker as a function of the saving and depreciation rates. c. Assume that the depreciation rate is 15 percent per year. Make a table showing steady-state capital per worker, output per worker, and consumption per worker for saving rates of 0 percent, 10 percent, 20 percent, 30 percent, and so on. (You might find it easiest to use a spreadsheet.) What saving rate maximizes output per worker? What saving rate maximizes consumption per worker? d. Use information from Chapter 3 to find the marginal product of capital. Add to your table from part (c) the marginal product of capital net of depreciation for each of the saving rates. What does your table show about the relationship between the net marginal product of capital and steady-state consumption?
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Step 1: Define Production function
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Step 2: a) determine the production function
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Step 3: b) Compute the capital per worker, output per worker, and consumption per worker
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