Scenario 25-1.An economy's production form takes the form Y = AF(L,K,H,N).
-Refer to Scenario 25-1.If the production function has the constant-returns-to-scale property,then it can be rewritten as
A)Y/L = AF(1,K/L,H/L,N/L)
B)Y/L = AF(L,1,H/L,N/L)
C)Y/L = AF(L,K/L,1,N/L)
D)Y/L = AF(L,K/L,H/L,1)

Question

Quizplus · Accepted Answer

When the production function has the constant-returns-to-scale property, it means that if all input factors are increased by the same proportion, output will increase by the same proportion. In other words, Y/L, which is output per unit of labor input, should remain constant. Therefore, we can rewrite the production function in terms of Y/L and the other input factors normalized by L. This yields choice A as the best option.