Answered: Production function 1 q (K, L) = K^αL^β…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.9P

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QUESTION 1
Consider the following production functions, where q is the quantity produced of the good, K
is the quantity of capital used, and L is the quantity of labor used:
Production function 1
q (K, L) = K^αL^β
Production function 2
q (K, L) = K^α + L^β
a) What is production function? Explain by providing appropriate graph.
b) Does Production function 1 have decreasing, constant, or increasing returns to scale?
Explain.
c) Suppose that α = 1 and β = 1. Does Production function 2 have decreasing, constant,
or increasing returns to scale? Explain.
d) Suppose that α = 1/2 and β = 1/2. Does Production function 1 have decreasing,
constant, or increasing returns to scale? Explain

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