As an alternative to the story of Robinson Crusoe, macroeconomists use the "aggregate production function," written as Y = AF(L,K,H,N), to link economy-wide output Y to the number of workers L, the stock of physical capital K, the stock of human capital H, the stock of natural resources N, and stock of technological knowledge A. With reference to this aggregate production function, please indicate whether each of the following statements is true or false. (a) The aggregate production function exhibits "constant returns to scale" if doubling the four inputs - workers L, physical capital K, human capital H, and natural resources N – while holding the stock of technological knowledge A fixed leads to a doubling of output. (b) The aggregate production function exhibits "constant returns to scale" if tripling the four inputs - workers L, physical capital K, human capital H, and natural resources N – while holding the stock of technological knowledge A fixed leads to a tripling of output

As an alternative to the story of Robinson Crusoe, macroeconomists use the "aggregate production function," written as Y = AF(L,K,H,N), to link economy-wide output Y to the number of workers L, the stock of physical capital K, the stock of human capital H, the stock of natural resources N, and stock of technological knowledge A. With reference to this aggregate production function, please indicate whether each of the following statements is true or false. (a) The aggregate production function exhibits "constant returns to scale" if doubling the four inputs - workers L, physical capital K, human capital H, and natural resources N – while holding the stock of technological knowledge A fixed leads to a doubling of output. (b) The aggregate production function exhibits "constant returns to scale" if tripling the four inputs - workers L, physical capital K, human capital H, and natural resources N – while holding the stock of technological knowledge A fixed leads to a tripling of output

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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