Suppose you have a production function equal to Q= 10(0.7K2+0.3L2)0.5. Does this function...

Question:

Suppose you have a production function equal to Q= 10(0.7K2 + 0.3L2)0.5.

Does this function exhibit

a. increasing,

b. decreasing, or

c. constant returns to scale? Explain.

Returns To Scale:

Unlike the marginal product of an input that measures the change in the total output that results from increasing the input by one unit, the returns to scale measures the change in the total output that results from scaling up all the by the same factor.

Answer and Explanation: 1

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Here's our given the production function:

  • {eq}Q= 10(0.7K^2+0.3L^2)^{0.5} {/eq}

This can be rewritten as:

  • {eq}Q^2= 100(0.7K^2+0.3L^2) {/eq}

In...

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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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