Some economists believe that the U. S. economy as a whole can be modeled with the following production function, called the Cobb-Douglas production function: Y = AK13L23 where Y is the amount of output, K is the amount of capital, L is the amount of labor, and A is a parameter that measures the state of technology. For this production function, the marginal product of labor is: MPL = 23A(KL)13 Suppose that the price of output (P) is $2, A is 3, K is 1,000,000, and L is 1,000. The labor market is competitive, so labor is paid the value of its marginal product. The amount of output produced (Y) is , and the dollar value of output (PY) is $ . The wage (W) is $ , and the real wage (WP) is . (Note: The wage is labor compensation measured in dollars, whereas the real wage is labor compensation measured in units of output.) What is the labor share (WLPY)? (Note: The labor share is the fraction of the value of output that is paid to labor.)
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