Question

Consider the following production function  q = K2 + L2. Does this production function exhibit constant, increasing...

Consider the following production function  q = K2 + L2.

  1. Does this production function exhibit constant, increasing or decreasing returns to scale?)
  2. Find an expression for the marginal rate of technical substitution. Does this production function exhibit diminishing marginal rate of technical substitution? Explain
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Answer #1

q = K2 + L2

Increase both inputs (i.e., K and L) by

It implies that this production function exhibit increasing return to scale.

(b)

MRTS = (MPL/MPK)

MRTS = 2L / 2K

MRTS = L/K

The change in MRTS due to change in L is positive (or greater than 0). It implies that production function exhibit cosntant marginal rate of technical substitution.

production function does not exhibit diminishing marginal rate of technical substitution.

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