# Calculating Marginal Productivity of Capital and Labor

The production function for the personal computers of DISK Inc. is given by Q= 10 (K *L)^0.5. DISK's competitor FLOPPY Inc's production function is Q = 10K^0.6 L^0.4.

(a) If K is limited to 9 units, in which company MP of labor greater?

(b) What can you say about the MP of labor for a given K?

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The production function for the personal computers of DISK Inc. is given by Q= 10 (K *L)^0.5. DISK's competitor FLOPPY Inc's production function is Q = 10K^0.6 L^0.4.

(a) If K is limited to 9 units, in which company MP of labor greater?

(b) What can you say about ...

#### Solution Summary

The solution provides detailed explanation of how to compute marginal productivity of labor and capital using specific production functions given in the problem.

Calculating Share of Income, Output, & Marginal Product of Labor

Consider two competitive economies that have the same quantities of labor (L = 400) and capital (K = 400), and the same technology (A = 100).

The economies of the countries are described by the following Cobb—Douglas production functions:

North Economy: Y = A L^.3 K^.7

South Economy: Y = A L^.7 K^.3

a. In North Economy, what is the labor's share of income? What is the capital's share of income?

b. Calculate the output for both economies.

c. Calculate the marginal product of labor for both economies.

d. Calculate the real wage for both economies.

e. Calculate the marginal product of capital for both economies.

f. Calculate the real rental rate for both economies.