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Assume a Cobb-Douglas Production Function in Which the Share of Capital

Question 6

Multiple Choice

Assume a Cobb-Douglas production function in which the share of capital is a = 0.25 and the share of labor is b = 0.75.If the rental cost of capital is rc = 10%, the desired capital stock of a cost-minimizing firm should be equal to


A) K* = 0.25Y
B) K* = 0.75Y
C) K* = 2.5Y
D) K* = 3.0Y
E) K* = 7.5Y

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