Answered: Production function 1 q (K, L) = K^αL^β…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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QUESTION 1
Consider the following production functions, where q is the quantity produced of the good, K
is the quantity of capital used, and L is the quantity of labor used:
Production function 1
q (K, L) = K^αL^β
Production function 2
q (K, L) = K^α + L^β
a) What is production function? Explain by providing appropriate graph.
b) Does Production function 1 have decreasing, constant, or increasing returns to scale?
Explain.
c) Suppose that α = 1 and β = 1. Does Production function 2 have decreasing, constant,
or increasing returns to scale? Explain.
d) Suppose that α = 1/2 and β = 1/2. Does Production function 1 have decreasing,
constant, or increasing returns to scale? Explain

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