Explain all answers. (1) Let the production function be q = AL^a K^b. the functi

Question

Explain all answers.

(1) Let the production function be q = AL^a K^b. the function exhibits decreasing returns to scale if:

A) a + b = 1

B) a + b < 1

C) not enough info.

(2) Suppose the production function for a certain device is q = LK. If neutral change has occurred, which of the following could be the new production function?

A) q = 2LK

B) q = 2LK^2

C) all the above.

(3) Suppose market demand is Qd = 100 - 6p. If all firms have long-run average cost curves equal to LRAC = 60 - 20q + 2q^2, how many identical firms will there be when this industry is in the long-run equilibrium?

A) 4

B) 8

D) 18

Explanation / Answer

B) a + b < 1

A) q = 2LK

B) 8

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.