Question

Differentiate what type of return to scale the following production function exhibit and explain your reason

            A. Q=L^0.5 K^0.5                               C. Q = L^0.3 K^0.5

            B. Q=L^2/3 K^2/3                   D. Q=AL^a K^b

Answer 1

A. Q=L^0.5 K^0.5                            

  

$$0.5+0.5=1$$

proportionally increases

            B. Q=L^2/3 K^2/3   

$$\frac{2}{3}+\frac{2}{3}=\frac{4}{3}>1$$

disproportionally increases

C. Q = L^0.3 K^0.5

$$0.3+0.5=0.8<1$$

disproportionally decreases

   D. Q=AL^a K^b

Depends on the value of the sum a + b