An economy's production function is Y = AK0.25L0.75, and the economy's total output in equilibrium is $800 billion. Total capital income in this economy is ________.
A) $200 billion
B) $25 billion
C) $750 billion
D) $267 billion
E) none of the above

Question

Quizplus · Accepted Answer

The production function Y = AK^0.25L^0.75 implies that capital's share of income is 0.25. Therefore, total capital income is 0.25 * $800 billion = $200 billion.

An Economy's Production Function Is Y = AK0