Asked by
Monse Sierra
on Oct 14, 2024
Verified
A firm has a production function f(x, y) 0.70(x0.80 y0.80) 2 whenever x 0 and y 0.When the amounts of both inputs are positive, this firm has
A) increasing returns to scale if x y 1 and decreasing returns to scale otherwise.
B) increasing returns to scale.
C) decreasing returns to scale.
D) constant returns to scale.
E) increasing returns to scale if output is less than 1 and decreasing returns to scale if output is greater than 1.
Production Function
A mathematical relationship expressing the maximum output that can be produced from a given set of inputs, showing the technological relationship between inputs and outputs.
Returns To Scale
The rate at which output increases as inputs are increased proportionally in the production process.
Input
Resources, materials, or data entered into a system for processing or production.
- Uncover the types of scale returns (rising, falling, steady) through the interpretation of production function exponents.
Verified Answer
CH
Learning Objectives
- Uncover the types of scale returns (rising, falling, steady) through the interpretation of production function exponents.