A firm uses 3 factors of production.Its production function is f(x, y, z)=min{x⁴/y, y³,(z⁵ -x⁵)/y²}.If the amount of each input is multiplied by 2, its output will be multiplied by A)8. B)4. C)16. D)0.22. E)The answer depends on the original choice of x, y, and z.

Question

Quizplus · Accepted Answer

The production function is homogeneous of degree 1, so if the amount of each input is multiplied by 2, the output will be multiplied by 2.

A Firm Uses 3 Factors of Production