Let the production function be q = AL^aK^b.Returns to scale are equal to A) a ∗ b. B) a + b. C) L^a + K^b. D) A ∗ L.

Name: Let the production function be q = AL a K b .Returns to scale are equal to A) a ∗ b. B) a + b. C) L a + K b . D) A ∗ L.
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Quizplus · Accepted Answer

Returns to scale are determined by the power to which all inputs (capital and labor) are raised in the production function. In this case, both labor (^a"U1") and capital (K^b) are raised to the power of a + b. Therefore, returns to scale are equal to a + b.

Let the Production Function Be Q = ALaKb

Let the Production Function Be Q = AL^aK^b