The production function f(z₁,z₂)= min(z₁,z₂)exhibits: A)constant returns to scale. B)initially increasing, and subsequently decreasing returns to scale. C)increasing returns to scale. D)decreasing returns to scale.

Question

Quizplus · Accepted Answer

The production function exhibits constant returns to scale because if we multiply both inputs by some constant value, the minimum value remains the same, and thus the output also increases by the same constant value. There is no change in the proportional relationship between input and output, indicating constant returns to scale.

The Production Function F(z1,z2)= Min(z1,z2)exhibits

The Production Function F(z₁,z₂)= Min(z₁,z₂)exhibits