The production function Q = -64X0.5Y0.4 exhibits:
A)constant returns to scale.
B)increasing returns to scale.
C)diminishing returns to scale.
D)increasing and then diminishing returns to scale.

Question

Quizplus · Accepted Answer

The production function exhibits diminishing returns to scale because the exponents on both X and Y are less than 1, meaning that as both inputs are increased, the output will eventually increase at a decreasing rate. The production function exhibits diminishing returns to scale because as the inputs X and Y are increased proportionately, output Q increases at a decreasing rate.

The Production Function Q = -64X0.5Y0.4 Exhibits