Scenario 7.3:
Use the production function: Q = 4L 1/2 K 1/2 .
-The production function in Scenario 7.3 exhibits:
A) decreasing returns to scale.
B) constant returns to scale.
C) increasing returns to scale.
D) all of the above at various levels of output.

Question

Quizplus · Accepted Answer

The production function exhibits constant returns to scale because if all inputs are increased by a constant factor k, the output will also increase by the same factor k. None of the inputs have a power greater than one, therefore there will be no increasing or decreasing returns to scale.

Scenario 7.3: Use the Production Function: Q = 4L1/2K1/2

Scenario 7.3: Use the Production Function: Q = 4L^1/2K^1/2