Country A and country B both have the production function: Y = F (K, L) = K^0.5 L^0.6 a) Does...
Question:
Country A and country B both have the production function:
Y = F (K, L) = K^0.5 L^0.6
a) Does this production function have constant returns to scale? Explain
Returns to Scale:
In economics, a production technology is said to have constant returns to scale if output increases proportionately when all inputs increase by the same proportion. When technology exhibits constant returns to scale, the average cost is constant in the long run.
Answer and Explanation: 1
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View this answerThe production function has increasing returns to scale.
To determine the returns to scale, we can perform the following test. Suppose the quantity...
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Returns to Scale in Economics: Definition & Examples
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Chapter 3 / Lesson 71
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Understand the meaning of returns to scale in economics. Learn about increasing returns to scale, constant returns to scale and decreasing returns to scale.
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