a) Do the following production functions exhibit constant returns to scale, increasing returns to scale, or...

a) Do the following production functions exhibit constant returns to scale, increasing returns to scale, or decreasing returns to scale? For full credit, show why.

1) Q= 10L^ 0.5K^0.3

2) Q= 10L^0.5K^0.5

3) Q= 10L^0.5K^0.7

4) Q= min{K, L}

b) Which objects pin down a_LC and a_KC? Explain carefully.

c) Why does labor being mobile across sectors automatically imply revenue maximization for firms? Explain carefully.

Expert Solution

Rahul Sunny answered 1 year ago

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