Scenario 7.3:
Use the production function: Q = 4L 1/2 K 1/2 .
-The production function in Scenario 7.3 exhibits:
A) diminishing returns to labor.
B) diminishing returns to capital.
C) decreasing returns to scale.
D) all of the above
E) A and B, but not C.

Question

Quizplus · Accepted Answer

The production function exhibits diminishing returns to labor and capital, as the exponents on both these inputs are less than one. However, it does not exhibit decreasing returns to scale, as the exponents on all inputs sum up to less than one. Therefore, the correct choice is E, as it includes A and B but not C.

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

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