Question

Consider the following Cobb-Douglas Production Function for Mauricio’s Machines Inc, a U.S. manufacturer of electronic precision...

  1. Consider the following Cobb-Douglas Production Function for Mauricio’s Machines Inc, a U.S. manufacturer of electronic precision tools:

Q=(L*0.4)+(K*0.7)

  1. Explain why a Cobb-Douglas production is indeed a representation of reality?
  1. Based on the function above, is Mauricio’s Machines’ business experiencing Economies of Scale or Diseconomies of Scale? Please explain your answer.

this is all the provided information so please answer the question
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Answer #1

(a) The Cobb DOuglas production structure provides a comprehensive way to explain the production function and it is convenient to use.

(b) To check whether the business is experiencing economies of scale or diseconomies of scale, we need to look at the the degree of homegeneity of the production function.

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