Use the following to answer questions :
Table 6-2
-Suppose that production is defined by the function recorded in Table 6-2.If that function displays constant returns to scale, then output for 20 units of land and 8 units of labor will equal 136.

Question

Use the following to answer questions :
Table 6-2 
-Suppose that production is defined by the function recorded in Table 6-2.If that function displays constant returns to scale, then output for 20 units of land and 8 units of labor will equal 136.

Quizplus · Accepted Answer

If the production function exhibits constant returns to scale, then doubling the inputs should double the output. Therefore, if output for 10 units of land and 4 units of labor is 34, then output for 20 units of land and 8 units of labor should be 68 (double of 34). However, the given output is 136, which is quadruple of 34 and satisfies the constant returns to scale property. Thus, the answer is A) True.

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