Suppose Tariq's body shop operates with the production function y = (1200z₁z₂)^1/2. Tariq's production function exhibits A)decreasing returns to scale B)scale production cannot be determined C)increasing returns to scale D)constant returns to scale

Question

Quizplus · Accepted Answer

The production function is given in a Cobb-Douglas form, y = A * L^α * K^β, where A, α, and β are constants, and L and K represent labor and capital inputs, respectively. In Tariq's case, the exponents of the inputs add up to 1 (1/2 + 1/2 = 1), indicating constant returns to scale. This means that if all inputs are increased by a certain percentage, output will increase by the same percentage.

Suppose Tariq's Body Shop Operates with the Production Function Y