When a production function can be expressed as $Q = \min \{ a K , B L \}$ , the relationship between capital and labor in the production function is that
A) capital and labor are perfect substitutes, and the isoquants are linear.
B) capital and labor must be combined in fixed proportions, and the isoquants are L-shaped.
C) capital and labor are easily substituted, and the isoquants are convex to the origin.
D) capital and labor are perfect substitutes, and the isoquants are L-shaped.

Question

Quizplus · Accepted Answer

In the production function $Q = \min \{ a K , B L \}$, the output is limited by the smaller of either the amount of capital or the amount of labor. This indicates that capital and labor must be combined in fixed proportions, and the isoquants are L-shaped. In other words, there is no substitution between capital and labor, which means they are not perfect substitutes, nor are they easily substituted.

When a Production Function Can Be Expressed As Q=min⁡{aK,BL}Q = \min \{ a K , B L \}Q=min{aK,BL}

When a Production Function Can Be Expressed As $Q = \min \{ a K , B L \}$