(Appendix) Which of the following production functions exhibits increasing returns to scale? A)Q = K^1/2L^l/2 B)Q = K^l/2L^2/3 C)Q = K^l/4L^l/3 D)Q = K/L

Question

Quizplus · Accepted Answer

A production function exhibits increasing returns to scale if doubling all of the inputs leads to a more than proportional increase in output. In option B, we can see that doubling all the inputs (K, L, and P0) will more than double the output, implying increasing returns to scale. Option A exhibits constant returns to scale, Option C exhibits decreasing returns to scale, and Option D exhibits constant returns to scale.

(Appendix) Which of the Following Production Functions Exhibits Increasing Returns