The figure below displays two level curves from a firm's production function. Assume that the marginal product of labor (L) and the marginal product of capital (K) are always positive. The bundle (L=2, K = 2) falls on the q = 1 level curve (i.e. all bundles on the curve result in one unit of output). The bundle (L = 3, K = 4) falls on the q 2 level curve. Which statement below is true? K q = 2 q = 1 3 (Note: if no image appears above, click here ) O The production function exhibits decreasing returns to scale 2.
The figure below displays two level curves from a firm's production function. Assume that the marginal product of labor (L) and the marginal product of capital (K) are always positive. The bundle (L=2, K = 2) falls on the q = 1 level curve (i.e. all bundles on the curve result in one unit of output). The bundle (L = 3, K = 4) falls on the q 2 level curve. Which statement below is true? K q = 2 q = 1 3 (Note: if no image appears above, click here ) O The production function exhibits decreasing returns to scale 2.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The figure below displays two level curves from a firm's production function. Assume that the
marginal product of labor (L) and the marginal product of capital (K) are always positive. The
bundle (L =2, K = 2) falls on the q = 1 level curve (i.e. all bundles on the curve result in one unit
of output). The bundle (L= 3, K = 4) falls on the q = 2 level curve. Which statement below is
true?
K
q= 2
q = 1
(Note: if no image appears above, click here )
O The production function exhibits decreasing returns to scale
O The production function exhibits constant returns to scale
O There is not enough information available to say which of the above statements is true
O The production function exhibits increasing returns to scale
2.
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