Suppose output Q is given by the Cobb-Douglas production function Q(K, L) = AK L 1

Question:

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.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Calculus For Business, Economics And The Social And Life Sciences

ISBN: 9780073532387

11th Brief Edition

Authors: Laurence Hoffmann, Gerald Bradley, David Sobecki, Michael Price

Question Posted: