Question

The three isoquants in the graph below refer to production levels of 100 (red), 200 (green), and 255 (blue). As long as the quantity of capital (K) and labor (L) used in the production process lies on the line a, whenever L is tripled K is also tripled. - =100 =200 - =255 L OPTIONS BELOW a Does this production function exhibit increasing, decreasing, or Increasing constant returns to scale? Decreasing Constant Not enough Information OPTIONS BELOW b Iftold you the production function that generated the isoquants Increasing returns to scale if Q>255 is Q-21.5LⓇ.SK., is your answer to question 18 dependent on decreasing returns to scale only if > 255 whether Q is a small number or a large number? increasing returns to scale only if 100_ Qdoesn't matter

Answer 1

a) When &=100 Labor-36 A Capital = 10 When 0 = 215 labor & 9 a capital = 36 Thus labor & capital thouples but output increases but less than theriphed. This function exhibits decreasing entwento scale. O = 21.5 K0:35, 0.5 verespective o Cre, d) = 2156K) OSAL) os - No(k) to scale reton re Decreasing us This Decreasing of a value D Ang is a doesn't matter.