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Does the production function: q = 100L - 20/k exhibit increasing, decreasing, or constant returns...

Question:

Does the production function:

{eq}q = 100L - \frac{20}{k} {/eq}

exhibit increasing, decreasing, or constant returns to scale?

Returns To Scale:

Unlike the marginal product of an input which measures the change in total output when one of the inputs is increased by one unit, returns to scale measures the change in total output when all of the factors of production are scaled up by the same proportion. A production function may exhibit increasing, decreasing or constant returns to scale.

Answer and Explanation: 1

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The production function exhibits increasing returns to scale.

We are given the production function:

  • {eq}q = 100L - \frac{20}{k} {/eq}

Consider the...

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Constant Returns to Scale: Definition & Example

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Chapter 16 / Lesson 17
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Explore constant returns to scale. Learn the definition of constant returns to scale and understand its use. Discover constant returns to scale examples.


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