The expansion path for a constant-returns-to-scale production function A)is a straight line through the origin with a slope greater than 1 if w v. B)is a straight line through the origin with a slope greater than 1 if w

Question

The expansion path for a constant-returns-to-scale production function
A)is a straight line through the origin with a slope greater than 1 if w > v.
B)is a straight line through the origin with a slope greater than 1 if w < v.
C)is a straight line through the origin,though its slope cannot be determined by w and v alone.
D)has a positive slope but is not necessarily a straight line.

Quizplus · Accepted Answer

The expansion path is the locus of the least-cost combinations of inputs for each level of output. For a constant-returns-to-scale production function, the expansion path is a straight line through the origin, as the proportional use of inputs is constant for any level of output. However, the slope of the expansion path depends on the relative prices of inputs (w and v) and cannot be determined solely by them. Therefore, the correct answer is C.

The Expansion Path for a Constant-Returns-To-Scale Production Function