Question

A? Cobb-Douglas production function

A. exhibits constant returns to scale.

B. exhibits decreasing returns to scale.

C. exhibits increasing returns to scale.

D. can exhibit? constant, increasing, or decreasing returns to scale.

Answer 1

Solution:-Option D is correct.

D. can exhibit? constant, increasing, or decreasing returns to scale.

Explaination:-A? Cobb-Douglas production function can exhibit? constant, increasing, or decreasing returns to scale.From: EconomicPoint.com:From: EconomicPoint.com:Returns to scale measure how much additional output will be obtained when all factors change proportionally. If the output increases more than proportionally, we say we have increasing returns to scale. If the output increases less than proportionally, we say we have decreasing returns to scale.

Y’ = A (cL)? (cK)?

Then:

If ?+?=1 , the production function has constant returns to scale.

If ?+? > 1 , the production function has increasing returns to scale.

If ?+? < 1 , the production function has decreasing returns to scale.