Question

Does the Production Function Q = 6K + 3L have increasing, constant or decreasing returns to scale?

Answer 1

Does the Production Function Q = 6K + 3L have increasing, constant or decreasing returns to scale?

Answer-

Q = 6K + 3L: To determine the returns to scale, I will begin by increasing both K and L by m.

Then I will create a new production function Q’. I will compare Q’ to Q.

Q’ = 6(K*m) + 3(L*m) = 6*K*m + 3*L*m = m(6*K + 3*L) = m*Q

After factoring, I can replace (6*K + 3*L) with Q, as we were given that from the start. Since Q’ = m*Q we note that by increasing all of our inputs by the multiplier m we've increased production by exactly m. As a result, we have constant returns to scale.