Question #148099
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!
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!
Expert's answer
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.
