Question

In Example 6.4 wheat is produced according to the production function: q=100(k0.6 0.4) Beginning with a capital input of 4 and a labor input of 49, show that the marginal product of labor and the marginal product of capital are both decreasing (Round responses to two decimal places.) The MPK at 5 units of capital is 156.12 The MP at 6 units of capital is 144.02 The MP at 50 units of labor is 8.84 The MP at 51 units of labor is 8.74 Does this production function exhibit increasing, decreasing, or constant returns to scale? O O O A. Increasing returns to scale because the inputs exhibit diminishing marginal returns B. Constant returns to scale because a proportionate increase in all inputs results in the same proportionate increase in output. C . Decreasing returns to scale because the inputs exhibit diminishing marginal returns

the second question

Answer 1

Returns to scale of a Cobb Douglas production function is calculated by adding up powers of the capital and the labor variable.

In the above production function capital has 0.6 and labor has 0.4 powers respectively. Hence returns to scale would be 1 (0.6+0.4). The production function exhibits constant returns to scale, whereby when input doubles the output will also exactly double.

Option B is the correct answer.