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An economy has the production function
Y=0.2(K + √N).
In the current period K = 100 and N = 100.
a. Graph the relationship between output and capital, holding labour constant at its current value. What is the MPK? Does the marginal productivity of capital diminish?
b. Graph the relationship between output and labour, holding capital constant at its current value. Find the MPN for an increase of labour from 100 to 110. Compare this result with the MPN for an increase in labour from 110 to 120. Does the marginal productivity of labour diminish?
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