Which of the following is true? A) The Cobb-Douglas production function is given by the general formula Q = AL^αK^β and the constant elasticity of substitution is equal to 0. B) The Cobb-Douglas production function is given by the general formula Q = AL^αK^β and the constant elasticity of substitution is equal to 1. C) The Cobb-Douglas production function does not exhibit a constant elasticity of substitution. D) The Cobb-Douglas production function always takes the form Q = K²L².

Question

Quizplus · Accepted Answer

The Cobb-Douglas production function is given by the general formula Q = ALS^αK^β where A is a constant, S is the amount of labor used, K is the amount of capital used, and α and β are constants that determine the elasticity of output with respect to labor and capital. The Cobb-Douglas production function exhibits a constant elasticity of substitution equal to 1, meaning that the ratio of the marginal products of labor and capital remains constant at all levels of production. Therefore, choice B is correct.

Which of the Following Is True