Which of the following profit functions exhibits a linear production function? A) π = P × K^0.75L^0.50 - 20L - 35K B) π = P × min(2L, 5K) - 20L - 35K C) π = P × (3K + 4L) - 20L - 35K D) π = P × (3K^0.5 + 4L^0.5)^1/0.2 - 20L - 35K

Question

Quizplus · Accepted Answer

The profit function π = P × (3K + 4L) - 20L - 35K exhibits a linear production function because there are no exponents or nonlinear functions in the inputs of K and L. The coefficient of K and L are constant, which indicates that there is a constant returns to scale. Alternatively, we can confirm this by verifying that the marginal product of K and L are constant.

Which of the Following Profit Functions Exhibits a Linear Production