Does the production function q=100L- {50}/{K} exhibit increasing, decreasing, or constant returns...
Question:
Does the production function
{eq}q=100L-\frac{50}{K} {/eq} exhibit increasing, decreasing, or constant returns to scale?
This production function exhibits _____
returns to scale.
Returns to Scale
The scale of an operation is its size. Returns to scale refer to how much production increases as the size of the operation increases. The more equipment is used in an operation, the more productive the workforce can be.
Answer and Explanation: 1
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The production function {eq}q = 100L - \dfrac{1}{K}{/eq} exhibits increasing returns to scale, because as capital is added the production increases.
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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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