Consider a production function for an economy with 2 factors of production L, K: Y=10(KL)1/2 where Y is real output, L is labour, K is capital. In this economy the factors of production are in fixed supply with L = 10, K = 10. What type of returns to scale does this production function exhibit. Demonstrate by example. If the economy is competitive what is the total income that will go to the owners of capital?
Consider a production function for an economy with 2 factors of production L, K: Y=10(KL)1/2 where Y is real output, L is labour, K is capital. In this economy the factors of production are in fixed supply with L = 10, K = 10. What type of returns to scale does this production function exhibit. Demonstrate by example. If the economy is competitive what is the total income that will go to the owners of capital?
Chapter11: Profit Maximization
Section: Chapter Questions
Problem 11.14P
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Consider a production function for an economy with 2 factors of production L, K: Y=10(KL)1/2 where Y is real output, L is labour, K is capital. In this economy the factors of production are in fixed supply with L = 10, K = 10. What type of returns to scale does this production function exhibit. Demonstrate by example. If the economy is competitive what is the total income that will go to the owners of capital?
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