Suppose output Q is given by the Cobb-Douglas production function Q(K, L) = AK L 1
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Suppose output Q is given by the Cobb-Douglas production function Q(K, L) = AKαL1−α, where A and α are positive constants and 0 < α < 1. Show that if K and L are both multiplied by the same positive number m, then the output Q will also be multiplied by m; that is, show that Q(mK, mL) = mQ(K, L). A production function with this property is said to have constant returns to scale.
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Related Book For
Calculus For Business, Economics And The Social And Life Sciences
ISBN: 9780073532387
11th Brief Edition
Authors: Laurence Hoffmann, Gerald Bradley, David Sobecki, Michael Price
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