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Consider the Solow growth model and the following production function: Y= K^0.3(AL)^0.7
A) If A= 2, L= 20,000 and K=400 what is Output?
B) Suppose the Labor force grows by 5% so that it is now 21,000. By how much does output increase?
C) Starting again with the conditions in part a, what is capital increases by 5%so that it is now 420. By how much does output increase?
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Bureau of Labor Statistics reported that in May 2007 total labor force was 152,762,000 of a possible 231,480,000 working age adults.
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What is the true initial cost figure Southern should use when evaluating its project?
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