Determine whether the following production function exhibits constant increasing or decreasing...
Question:
Determine whether the following production function exhibits constant increasing or decreasing returns to scale in capital and labor.
A) {eq}Y = AK^\frac{3}{4} L^\frac{3}{4} {/eq}
Production function:
The production function shows the relationship between input and output. It has three returns to scale that are increasing, decreasing, or constant return to scale. In constant return to scale, as the input increases by double amount then output also increases by double amount.
Answer and Explanation: 1
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Production function exhibits increasing return to scale. It shows that the sum of the exponent is greater than one. It means the more output is...
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Production Function in Economics: Definition, Formula & Example
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Chapter 11 / Lesson 27
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Learn about the production function. Read the production function definition in economics, learn the production function formula. Plus, see graphs and examples.
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