Suppose Diane's spa operates with the production function y = (1200z₁z₂)^2/3. Diane's production function exhibits A)scale production cannot be determined B)constant returns to scale C)increasing returns to scale D)decreasing returns to scale

Question

Quizplus · Accepted Answer

The production function exhibits increasing returns to scale since an increase in all inputs by a certain percentage leads to a more than proportionate increase in output. This can be seen by observing that all inputs are raised to a power greater than 1 in the production function, indicating that increasing them all by a certain percentage would lead to a greater than proportionate increase in output.

Suppose Diane's Spa Operates with the Production Function Y =