If output is described by the production function Y = AK ^0.2L^0.8, then the production function has: A) constant returns to scale. B) diminishing returns to scale. C) increasing returns to scale. D) a degree of returns to scale that cannot be determined from the information given.

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Quizplus · Accepted Answer

The production function Y = AK^0.2L^0.8 exhibits constant returns to scale because the sum of the exponents of K (capital) and L (labor), 0.2 + 0.8 = 1, indicates that if all inputs are increased by a certain percentage, output will increase by the same percentage.

If Output Is Described by the Production Function Y =