Question

1+2 Multiple choice choose best answer 1l If output is described by the production function Y = LaKI-a, then the production function has: (b) diminishing returns to scale (c) increasing returns to scale (d) constant returns to scale (e) None of the above 2. If output is described by the production function Y L°K, with e the production function has: (a) diminishing returns to scale (b) increasing returns to scale (c) constant returns to scale (d) degree of returns to scale that cannot be determined from the information given (e) None of the above 3. Please explain if the following statement is true or false: If you pay $10,000 Canadian dollars for a used truck for your business, then the aggregate investment of the economy is increasing by $10,000 Canadian dollars. Justify your answer.

0 0
Add a comment Improve this question Transcribed image text
Answer #1

1. Ans is d) constant returns to scale

Explanation:

Y(L,K) = Lα K1-α​​​​​​​

To find the returns of scale we multiply both L and K by t and if we get the power of t = 1 then it has constant returns to scale if power of t < 1 so decreasing returns to scale and if power of t > 1 then increasing returns to scale.

Y(t*L, t*K) = (tL)α​​​​​​​ (t*K)1-α​​​​​​​

Y(t*L, t*K) = t * Lα​​​​​​​ K1-α​​​​​​​

Y(t*L, t*K) = t*Y(L,K)

as the power of t = 1, so constant return to scale.

2.

Ans is a) Diminishing return to scale.

Explanation:

It is so because α + β < 1, so the power of t always comes out will be also less than 1 means decreasing returns to scale.

3. False. Because this is a resale. Used goods are not taken into account for calculating GDP because the value of the truck should have been included in the year of its' manufacture.

Add a comment
Know the answer?
Add Answer to:
1+2 Multiple choice choose best answer 1l If output is described by the production function Y...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • If output is described by the production function , then the production function has: (a) degree...

    If output is described by the production function , then the production function has: (a) degree of returns to scale that cannot be determined from the information given. (b) diminishing returns to scale (c) increasing returns to scale (d) constant returns to scale (e) None of the above

  • If output is described by the production function , with then the production function has: (a)...

    If output is described by the production function , with then the production function has: (a) diminishing returns to scale (b) increasing returns to scale (c) constant returns to scale (d) degree of returns to scale that cannot be determined from the information given. (e) None of the above We were unable to transcribe this imageWe were unable to transcribe this image

  • 1.(20 pts) Consider the following production function: Y 4K NI-a and assume that a= ½ a....

    1.(20 pts) Consider the following production function: Y 4K NI-a and assume that a= ½ a. Is this production function characterized by diminishing returns, constant returns, or increasing returns to scale? Justify your answer. Is the function characterized by diminishing or increasing returns to capital? Justify your answer. b. Transform the production function into a relation between output per worker (Y/N) and capital per worker (K/N), and then calculate the steady state levels of capital stock per worker, output per...

  • Morgan and Doyle have a business. The production function for that business can be described by the following expressi...

    Morgan and Doyle have a business. The production function for that business can be described by the following expression: Y=LL2, where L = hours of work put in by Morgan and L2 = hours of work put in by Doyle. This production function exhibits: O constant returns to scale. increasing returns to scale, i.e., when doubling all inputs increases output by more than double. decreasing returns to scale, i.e., when doubling all inputs increases output by less than double. O...

  • QUESTION 8 Which of the following stresses money's role as a liquid store of value: a...

    QUESTION 8 Which of the following stresses money's role as a liquid store of value: a transactions demand b. precautionary demand c. asset demand d. miserly demand QUESTION 9 If output is described by the production function Y - AKAL?-a, then the production function has: a constant returns to scale b. diminishing returns to scale c. increasing returns to scale d. a degree of returns to scale that cannot be determined from the information given QUESTION 10 The opportunity cost...

  • Consider the production function given by y = f(L,K) = L^(1/2) K^(1/3) , where y is...

    Consider the production function given by y = f(L,K) = L^(1/2) K^(1/3) , where y is the output, L is the labour input, and K is the capital input. (a) Does this exhibit constant, increasing, or decreasing returns to scale? (b) Suppose that the firm employs 9 units of capital, and in the short-run, it cannot change this amount. Then what is the short-run production function? (c) Determine whether the short-run production function exhibits diminishing marginal product of labour. (d)...

  • d. Assume that the aggregate production function is given by: where Y is aggregate output, K is capital, L is the number of workers in the economy and E is the state of technology. Further assume...

    d. Assume that the aggregate production function is given by: where Y is aggregate output, K is capital, L is the number of workers in the economy and E is the state of technology. Further assume that capital depreciates at a rate of δ, the rate of technological progress is g, the population is growing at a rate of n and the saving rate is s. I5 marks] i. Determine the scale of production? Suppose capital is increased by a...

  • A firm uses two inputs x1 and x2 to produce output y. The production function is...

    A firm uses two inputs x1 and x2 to produce output y. The production function is given by f(x1, x2) = p min{2x1, x2}. The price of input 1 is 1 and the price of input 2 is 2. The price of output is 10. 4. A firm uses two inputs 21 and 22 to produce output y. The production function is given by f(x1, x2) = V min{2x1, x2}. The price of input 1 is 1 and the price...

  • 3) Consider some country whose aggregate production function can be described as Y = AF(K,N). As...

    3) Consider some country whose aggregate production function can be described as Y = AF(K,N). As usual, A is total factor productivity, Y is output, K is capital and N is labor. A bar over each factor indicates that the factor is fixed in the long run. Assume this function has constant returns to scale. On the expenditure side, note that, ĭ = C + I + G + NX.Given this information, answer the following as true, false or uncertain...

  • 1.The aggregate production function is Y = F(K, L) where Y = real GDP, K =...

    1.The aggregate production function is Y = F(K, L) where Y = real GDP, K = capital and L = labor. For Y = F(K, L) = K1/3Lb where b = 0 there are A.decreasing returns to scale B.increasing returns to scale C.constant returns to scale D.none of the other answers is correct. E. we cannot determine the returns to scale 2.If y = f(x) = ln U(x) then dy/dx = f’(x) = a. none of the other answers is...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT