Answered: a) Obtain the per capita production function for each firm. b) Argue why all firms would choose the same capital/labor (k) and find th aggregate per capita…

ENGR.ECONOMIC ANALYSIS

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Question

Assume an economy in which there are i = 1,2, .., M identical firms, each with
the following production function:
Yt = A K“ L;1-a, 0< a <1
Notice that A is the same for all firms and are given for the whole economy as a
function of the aggregate capital/labor ratio:
(KY
A = B (),
Y > 0
where B > 0 is a constant. Aggregate output is the sum of the outputs of each of
the firms so that:
M
di=1
in terms of the capital per worker k; and A.
(a) Obtain the per capita production function for each firm.
b) Argue why all firms would choose the same capital/labor (k) and find the
aggregate per capita production function of the economy.

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Based in info and your answer in question 1 what is capital productivity
The aggregate production function is Y = 5KL. If there are 18 units of capital and 50 units of labor, aggregate output is ________________.
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