If output is described by the production function Y = AK0.2L0.8, then the production function has:
A)constant returns to scale.
B)diminishing returns to scale.
C)increasing returns to scale.
D)a degree of returns to scale that cannot be determined from the information given.

Question

Quizplus · Accepted Answer

The production function Y = AK^0.2L^0.8 has constant returns to scale because the exponents of K and L sum to 1 (0.2 + 0.8 = 1).

If Output Is Described by the Production Function Y =