Consider a production function with two inputs: f(x1,x2) = (x1)a(x2)b Suppose that a = 0.7 and b = 0.7. What type of returns to scale does this production function exhibit? Type 1 for increasing, 0 for constant, and -1 for decreasing.
Consider a production function with two inputs: f(x1,x2) = (x1)a(x2)b Suppose that a = 0.7 and b = 0.7. What type of returns to scale does this production function exhibit? Type 1 for increasing, 0 for constant, and -1 for decreasing.
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.8P
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Consider a production function with two inputs: f(x1,x2) = (x1)a(x2)b Suppose that a = 0.7 and b = 0.7. What type of returns to scale does this production function exhibit? Type 1 for increasing, 0 for constant, and -1 for decreasing.
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