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Consider a production function for an economy:
Y = 20 (L.5K.4N.1)
where L is labor, K is capital, and N is land. In this economy the factors of production are in fixed supply with L = 100, K = 100, and N = 100.
a. What is the level of output in this country?
b. Does this production function exhibit constant returns to scale. Demonstrate by example.
c. If the economy is competitive so that factors of production are paid the value of their marginal products, what is the share of total income that will go to land?
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