A firm has a production function of Q(K,L) = K04L0.6 a) Explain the concept of returns to scale. Does the function provide increasing, decreasing, or constant returns to scale? b) Provide an example of a typical sector with increasing returns to scale. c) Explain the concept of MRTS and argue whether the MRTS for this production function is diminishing. Please also provide a graphical illustration using numbers.
A firm has a production function of Q(K,L) = K04L0.6 a) Explain the concept of returns to scale. Does the function provide increasing, decreasing, or constant returns to scale? b) Provide an example of a typical sector with increasing returns to scale. c) Explain the concept of MRTS and argue whether the MRTS for this production function is diminishing. Please also provide a graphical illustration using numbers.
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.7P
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A firm has a production function of ?(?,?) = ??.???.?
a) Explain the concept of returns to scale. Does the function provide increasing, decreasing, or constant returns to scale?
b) Provide an example of a typical sector with increasing returns to scale.
c) Explain the concept of MRTS and argue whether the MRTS for this production
function is diminishing. Please also provide a graphical illustration using numbers.
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