Suppose a production function is of the form: Q = K2L. What returns to scale apply...

Suppose a production function is of the form: Q = K²L. What returns to scale apply to this production function? How will the average cost of production curve pertaining to this function look like? What about the marginal cost curve? Draw these average and marginal cost curves.

Expert Solution

If the production function is the form of Q = k^2 L here can use the law of returns to scale as per this all factors of production is variable in long run. Here specifically it is a increasing returns to scale.that means if the factors of production made double with different propotion that lead to increase the output in higher rate.
The average total cost of product curve is half oval shape type or parabola shape which is symmetrical to center to the above. And intersect with the marginal cost.
Marginal cost curve u shaped like the average total product.in this returns to scale the marginal cost start the low value to the increasing nature at the end of a constant level after reaching that it go to decrease to a minimum level.The marginal cost curve is a curve which shows an interrelationship of cost change in the additional one unit production in short run.

Rahul Sunny answered 1 year ago

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