What is labor's share of income estimated to be when the only other input to production...

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Question

What is labor's share of income estimated to be when the only other input to production...

What is labor's share of income estimated to be when the only other input to production is physical capital? (α = 1/3)

a. 2/3

b. 0

c. 1/3

d. 1/2

business economics

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Answer 1

Answer #1

According to the Cobb-Douglas production function -

Capital share of income = α

Labor share of income = 1 - α

α = 1/3

So,

Labor share of income = 1- α = 1- (1/3) = 2/3

Thus,

The labor share of income is estimated to be 2/3.

Hence, the correct answer is the option (a).

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Answer 2

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What is labor's share of income estimated to be when the only other input to production...

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