Consider the Cobb–Douglas production function \(Q=AK^{\alpha}L^{\beta}\), with A, α and β positive constants and both K and L freely variable. Which statements are true? (a) This is a long-run production specification.
(b) This specification holds one input fixed as in the short run.
(c) This function necessarily has increasing returns to scale.
(d) Its output elasticities with respect to the two factors are constant.
(a) and (d)
(a) and (d) are true. Both factors can vary, and their output elasticities are α and β. Returns to scale are increasing, constant or decreasing according as α + β is greater than, equal to or less than 1.
Important Questions from Economy
When goods are produced by exploiting natural resources, it is an activity associated with:
A system in which local farmers were allowed to cultivate temporarily within a plantation is known as:
Which goods from India dominated the international textile markets before the age of mechanized industries?
Which type of farming is practiced in areas of high population pressure on land?
The major economic attribute for comparing countries is their:
