If a production function is represented as q = L^α K^β,the long-run average cost curve will be horizontal as long as A)α + β = 0. B)α + β = 1. C)q 0. D)L = K.

Question

If a production function is represented as q = L^α K^β,the long-run average cost curve will be horizontal as long as A)α + β = 0. B)α + β = 1. C)q > 0. D)L = K.

Quizplus · Accepted Answer

In the given production function, α and β represent the output elasticities of labor (L) and capital (K), respectively. When α + β = 1, it implies constant returns to scale, meaning that doubling the inputs (L and K) will double the output (q), leading to constant long-run average costs. This is why the long-run average cost curve will be horizontal.

If a Production Function Is Represented as Q = Lα

If a Production Function Is Represented as Q = L^α