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Consider the production function Y = z.F(K,L, A) where Y is output, z is technology, K is capital, L is labour and A is the area of land. Which 3 of the following statements are correct?

Consider the production function Y = z.F(K,L, A) where Y is output, z is technology, K is capital, L is labour and A is the area of land. Which 3 of the following statements are correct?

Understanding Business
Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Consider the production function Y = z.F(K,L, A) where Y is output, z is technology, K is capital, Lis labour and A is the area of land. Which 3 of the following statements are correct? Select one or more: O a. Diminishing marginal products means that if K,L and A all double, output will less than double. b. The property of a diminishing marginal product of labour means that, if labour is increased while other inputs to production are held constant, output will increase, but by a decreasing amount. O c. If there are constant returns to scale this implies that individual marginal products are not diminishing. d. If marginal products are diminishing, then the marginal product of labour measured in terms of discrete changes is less than the marginal product in terms of calculus. If z increases, the average product of all inputs increases but the marginal products do not. е. O f. Holding K and A constant, if z increases the production function in terms of labour input shifts up by a constant amount at all levels of labour input. g. Constant returns to scale means that if all inputs to production double, output doubles. O h. If there are increasing returns to scale, then holding capital and land constant, the production function in terms of labour will be convex (ie will increase at an increasing rate).
Transcribed Image Text:Consider the production function Y = z.F(K,L, A) where Y is output, z is technology, K is capital, Lis labour and A is the area of land. Which 3 of the following statements are correct? Select one or more: O a. Diminishing marginal products means that if K,L and A all double, output will less than double. b. The property of a diminishing marginal product of labour means that, if labour is increased while other inputs to production are held constant, output will increase, but by a decreasing amount. O c. If there are constant returns to scale this implies that individual marginal products are not diminishing. d. If marginal products are diminishing, then the marginal product of labour measured in terms of discrete changes is less than the marginal product in terms of calculus. If z increases, the average product of all inputs increases but the marginal products do not. е. O f. Holding K and A constant, if z increases the production function in terms of labour input shifts up by a constant amount at all levels of labour input. g. Constant returns to scale means that if all inputs to production double, output doubles. O h. If there are increasing returns to scale, then holding capital and land constant, the production function in terms of labour will be convex (ie will increase at an increasing rate).
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