Suppose the production function faced by the firm is Q = A^1/3 B^1/3.If the firm increases the use of both inputs by 1 percent,output will increase by A)2 percent. B)more than 10 percent. C)0 percent. D)less than 1 percent.

Question

Quizplus · Accepted Answer

Since the production function is not linear, it is not possible to determine the precise percentage change in output resulting from a 1 percent increase in inputs. However, since the question asks for a general approximation, we can use the concept of elasticity to infer that the percentage increase in output will be less than the percentage increase in inputs. In this case, both inputs have an elasticity of less than 1 (i.e. they are relatively inelastic), which means that a 1 percent increase in inputs will result in a less than 1 percent increase in output. Therefore, the correct answer is C, 0 percent.

Suppose the Production Function Faced by the Firm Is Q