Suppose the production function for T-shirts can be represented as q = L0.25K0.75. Show that the production function has constant returns to scale
What will be an ideal response?
When L = L1 and K = K1, q = q1. Let L2 = m ? L1 and K2 = m ? K1 so that both L and K have increased by the same proportion. Then, q2 = (m ? L1)0.25 (m ? K1)0.75 = m0.25+0.75
L10.25 K10.75 = m ? q1. Thus, for any m, output changes by the same proportion that the inputs changed.
You might also like to view...
Inflation adjusted hourly wages for the average hourly worker is _______ today than it was in 1973.
A. higher B. lower C. about the same
A cable company can add a subscriber for ________ and a market failure occurs because the price charged ________
A) nearly zero marginal cost; exceeds marginal cost B) less than average cost; reduces consumer surplus C) nearly zero marginal cost; is extortionist D) average variable cost; increases producer surplus
Which of the following job market signals are less costly for high-quality workers to send than low-quality workers?
A) Spending long hours at the office B) Sending emails to coworkers and supervisors at night and on weekends C) Leaving voice-mail message for colleagues before or after regular business hours D) all of the above
If the price of hybrid cars declines by 70 percent, the quantity demanded will _____ and the demand for conventional gasoline engine automobiles will _______.
Fill in the blank(s) with the appropriate word(s).