Given that L = labor and K = capital,which of the following production functions displays decreasing returns to scale? A)Q = aL + bK² B)Q = aL + bK + c C)Q = bLK D)Q = cL^0.2K^0.5 E)Q = cL²K⁵

Question

Quizplus · Accepted Answer

A production function displays decreasing returns to scale if, when all inputs are increased by a certain proportion, the output increases by a smaller proportion. In option D, the sum of the exponents of L and K is 0.2 + 0.5 = 0.7, which is less than 1, indicating decreasing returns to scale.

Given That L = Labor and K = Capital,which of the Following