Question
When the sum of exponents exceeds one (a + b > 1) in the Cobb-Douglas production function, it causes which one of the following?
The correct answer is
Increasing returns to scale
For \(Q=AL^aK^b\), multiplying both inputs by \(t\gt 1\) multiplies output by \(t^{a+b}\). If \(a+b\gt 1\), output rises more than proportionately: increasing returns to scale.
Was this answer helpful?
Important Questions from Production Function
- Match the stages of production with their corresponding characteristics :
(i) Stage-I (a) Total product declines, Marginal product is negative (ii) Stage-II (b) Total product increases at an increasing rate, marginal product positive (iii) Stage-III (c) Total product increases at a diminishing rate, marginal product is zero. - Neo-classical production function has which of the following characteristics ?
(a) Positive and diminishing marginal productivities of the factors
(b) Constant returns to scale
(c) Satisfies Inada conditions
Choose the correct answer from the code below : - Which one of the following is not an Hirofumi Ujawa condition for a well behaved production function ?
- Exponents of the Cobb-Douglas production represent :
- Given the production function $Q = 2 \cdot K^{1/3} \cdot L^{2/3}$, find the output level when 8 units of capital and 27 units of labour are used.
Need Expert Advice?
