Suppose the production of mp3 players can be represented by the following production function: q = L^0.4K^0.4.The firm currently produces q₁ units.If all inputs doubled,the new level of output will equal A) 2^0.4 q₁. B) 2^0.8 q₁. C) 0.8 q₁. D) 1.6 q₁.

Question

Quizplus · Accepted Answer

Doubling all inputs in a production function with constant returns to scale would double the output. However, the given production function exhibits increasing returns to scale due to the sum of the exponents (greater than 1), leading to more than double the output. Specifically, if the exponents sum to 1.4, doubling inputs would increase output by $2^{1.4}$, which is an increase by a factor of approximately 2.64, not merely doubling. Therefore, the correct answer involves an increase greater than double, aligning with option B, which suggests an output increase by a factor related to the exponent sum, indicating a more substantial increase than simply doubling the output.

Suppose the Production of Mp3 Players Can Be Represented by the Following