For homothetic production functions, the scale factor determines the:
A)scale of production along the output expansion path.
B)total weight of goods produced per period.
C)cost minimizing quantity of output.
D)profit maximizing quantity of output.

Question

Quizplus · Accepted Answer

In homothetic production functions, that exhibit constant returns to scale, the scale factor affects the both inputs and outputs proportionately, meaning it determines the scale of production along the output expansion path. The scale factor would not affect the total weight of goods produced per period, cost minimizing quantity of output, or profit maximizing quantity of output as those are determined by other factors such as input prices, market demand, and output prices.

For Homothetic Production Functions, the Scale Factor Determines The