Practice question · True or false
In , the exponent 0.4 is the marginal product of capital.
Hints
- What does the exponent measure, a level or a share?
- It is an elasticity.
Show the answer
False
Why
False. The exponent is the output elasticity of capital, and under competitive factor pricing it equals capital's share of output. The marginal product is , which changes with the input levels, the exponent does not. Exponents summing to 1 is what makes the function constant-returns.
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