Question

5. Which of the following statements with respect to a Cobb-Douglas production function is not true?

a. MPK and MPL depend on the quantity of both K and L used

b. the exponent of each input refers to its output elasticity

c. the sum of the exponents determine the type of returns the production function exhibits

d. the sum of the exponents represent the expansion path

Answer 1

The answer is (d): The sum of the exponents represent the expansion path.

Option (a) is correct because marginal productivity of capital (MPK) and marginal productivity of labor (MPL) depend on the quantity of both capital (K) and labor (L) used

Option (b) is correct because the exponent of each input refers to its output elasticity

Option (c) is correct because the sum of exponents determine the type of returns the production function exhibits

If α + β = 1, then it is constant returns to scale

If α + β < 1, then it is decreasing returns to scale

If α + β > 1, then it is increasing returns to scale

Option (d) is not correct because the sum of exponents does not represent the expansion path. The sum of exponents represents the type of returns to scale