From the Cobb-Douglas production function we learn that there are two sources that help explain cross-country differences in per capita income: ________ and ________.

Question

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The question asks about the two sources that help explain cross-country differences in per capita income as learned from the Cobb-Douglas production function.
Option 1: 'capital; labor productivity' — This pairing misses the standard framing from the Cobb-Douglas perspective, which does not isolate 'labor productivity' as a separate source in the two-factor decomposition; thus this option is not aligned with the classic interpretation.
Option 2: 'labor share of income; TFP' — While the labor share and total factor productivity (TFP) are important macro quantities, the Cobb-Douglas framework emphasizes TFP and capital per person as the explanatory channels for cross-country income differences, not labor share as the primary source in this dichotomy.
Option 3: 'TFP; capital per person' — This matches the canonical Nobel-influenced decomposition where per-capita income differences across countries are attributed to differences in total factor productivity (TFP) and the amount of capital available per person, given a Cobb-Douglas production structure. TFP captures efficiency and technology gaps, while capital per person captures the accumulation effect.
Option 4: 'labor per person; capital' — This phrasing misrepresents the standard two-sources framing in the Cobb-Douglas context. It suggests a breakdown that is more about labor input per person and capital, which is not the textbook pair used to explain cross-country income differences in the Cobb-Douglas setup.
Option 5: 'none of the above' — Since option 3 embodies the widely accepted pair (TFP and capital per person) within the Cobb-Douglas framework, this 'none of the above' choice is incorrect.
Putting these pieces together, the reasoning shows that Option 3 correctly identifies the two sources described by the Cobb-Douglas production function when analyzing cross-country income differences, namely TFP and capital per person. The other options either mix in constructs not central to this specific decomposition or misstate the two primary sources of variation in per capita income under the standard model.

ECON3020W04 ECON Quiz 1- Requires Respondus LockDown Browser

From the Cobb-Douglas production function we learn that there are two sources that help explain cross-country differences in per capita income: and .

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ECON*3020*W04 ECON Quiz 1- Requires Respondus LockDown Browser

From the Cobb-Douglas production function we learn that there are two sources that help explain cross-country differences in per capita income: ________ and ________.

View Explanation

Log in for full answers

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Use the following graph to answer the next question, where LRATC = long-run average total cost. What happens when a firm adopts a new technology?

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An economy's factors of production and its production function determine the economy's:

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

ECON3020W04 ECON Quiz 1- Requires Respondus LockDown Browser

From the Cobb-Douglas production function we learn that there are two sources that help explain cross-country differences in per capita income: and .