For the production function F(L,K)=(L+K)^2 find whether the firm has constant, increasing or decreasing returns to...

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For the production function F(L,K)=(L+K)^2 find whether the firm has constant, increasing or decreasing returns to...

For the production function F(L,K)=(L+K)^2 find whether the firm has constant, increasing or decreasing returns to scale. .

A firm has monthly production function F(L,K) = L+√1+K, where L is worker hours per month and K is square feet of manufacturing space.

A. Does the firm's technology satisfy the Productive Inputs Principle?

B. What is the firm’s MRTSlk at input combination (L, K)? Does the firm’s technology have a declining MRTS?

C. Does the firm have increasing, decreasing, or constant returns to scale?

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Answer 1

Answer #1

A firm has increasing returns to scale if, multiplying all the inputs by a factor of t (greater than 1), the output increases more than by a factor of t.

Similarly, A firm has decreasing returns to scale if, multiplying all the inputs by a factor of t (greater than 1), the output increases less than by a factor of t.

i.e IRS ( Increasing Returns) f(tk, tl) > tf(k,l)

DRS f( tk,tl) < tf( k,l)

CRS f (tk,tl) = tf( k,l)

Note: Please recheck the second production function ( monthly) before finding out its returns to scale.

I have illustrated the basic concepts below, which will help you to solve out even different questions easily. FIL,K 2. (L+K) F(tL, EK 2 (L+K) t F(L,K) * 七フ; F(tL, tk) tFCK,L) 7 t F (K,L) h, ncuig ketuns to Menthly talue ain FCL, K L+ i

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Answer 2

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