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Assume Firm Y's production function is given by the following Cobb Douglas equation:

Q = 0.5 x L0.6 x K0.5

where L denotes labor and K denotes capital.

a. Does the production function exhibit increasing, decreasing or constant returns to scale? describe.

b. If labor hours increase by 10%, what is the percentage change in output? describe.

c. If capital decreases by 10%, what is the percentage change in output? describe.

d. If the number of labor hours increases by 10% and the number of hours of capital used decreases by 10%, what is the percentage change in output?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M942341

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