O the firm buys one more unit of labor. o the firm produces one more unit of out
ID: 1156814 • Letter: O
Question
O the firm buys one more unit of labor. o the firm produces one more unit of output. 0 the firm moves to the next highest isoquant. QUESTION 3 Consider a production function: Q = L + 2K . Which of the following statements is correct? O The production function has decreasing returns to scale. O The production function has increasing returns to scale. O The production function has constant returns to scale. O Returns to scale vary with the level of output. QUESTION 4 Suppose the total cost of producing a product can be represented as C-100+ 923 The marginal cost w 02. 10. O 0.33.Explanation / Answer
Ans) the production function has constant returns to scale
Q = L + 2K, put L = tL and tK
Q' = tL + 2tK now taking t common
Q' = t(L + 2K) = tQ
Since the power of t is 1 so the production function has constant returns to scale.
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