Answer to Question #148099 in Microeconomics for Crystal

Question

Derive the returns to scale associated with the following production functions
when both inputs, K and L, are increased by t times and t > 1.
a) Q = min( αL, βK), α, β > 0
b) Q = L ^2/3 K ^2/3

Need help in all, thank you!

Answer 1

The returns to scale associated with the following production functions are:

a) Q = min( αL, βK) has decreasing returns to scale, because the function choose minimum value.

b) Q = L^2/3 K^2/3 has decreasing returns to scale, because the power of both L and K is below 1.