Consider a production function for an economy with 2 factors of production L, K: Y=10(KL)1/2 where Y is real output, L is labour, K is capital. In this economy the factors of production are in fixed supply with L = 10, K = 10. What type of returns to scale does this production function exhibit. Demonstrate by example. If the economy is competitive what is the total income that will go to the owners of capital?

Consider a production function for an economy with 2 factors of production L, K: Y=10(KL)1/2 where Y is real output, L is labour, K is capital. In this economy the factors of production are in fixed supply with L = 10, K = 10. What type of returns to scale does this production function exhibit. Demonstrate by example. If the economy is competitive what is the total income that will go to the owners of capital?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.5P

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