Let the production function be q = ALaKb. The function exhibits decreasing returns to scale if
A) a + b = 1.
B) a + b > 1.
C) a + b < 1.
D) Cannot be determined with the information given.
C
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In the late 1920s, the U.S. economy experienced a decrease in investment, which perhaps triggered the Great Depression. The decrease in investment
A) increased aggregate supply. B) decreased aggregate supply. C) increased aggregate demand. D) decreased aggregate demand. E) increased potential GDP.
A real cost of tariffs and quotas that is difficult to measure is that they
A) encourage rent seeking. B) shift income from consumers to producers. C) limit the quantity of imports. D) reduce wages. E) cause deflation.
The amount of labor a firm employs depends on
A) the market wage. B) the market price for the good produced. C) Both A and B. D) None of the above.
Which of the following was the result of the Federal Reserve's purchase of mortgage-backed securities in 2009?
a. MBS interest rates declined, home mortgage rates declined, and the Fed turned a profit on these operations. b. MBS interest rates declined, home mortgage rates declined, but the Fed had a loss on these operations. c. MBS interest rates increased, home mortgage rates declined, and the Fed turned a profit on these operations d. MBS interest rates increased, home mortgage rates increased, but the Fed had a loss on these operations