Question

e Sampld Action Phone Call Not Working with X Top Hat MyPack Sessic x th Course: ARE 2 x x er M x X ed/ Microsoft AutoUpdate Updates are ready to be installed. How likely are you to recommend Top Hat to your closest friends? 6 7 9 10 2 Very likely Very unlikely Neutral Returns to scale Homework Unanswered Does the production function f(L, K)= L/ K exhibit increasing, decreasing, or constant returns to scale. A Increasing returns to scale O B Decreasing returns to scale Constant returns to scale C The answer depends on the input quantities being used. O D 1 Submit 1 attempt left Unanswered MRTS Homework lecture8.pdf lecture9.pdf lecture7 (2).pdf A .p... Search or type URL O O

Answer 1

F(K,L) =L^1/3 K^1/3

Double the inputs K and L , we get :

= (2L)^1/3(2K)^1/3

= 2^{1/3 +1/3} (L^1/3 K^1/3)

= 2^2/3 (L^1/3 K^1/3) < 2 F(K,L)

Because increasing the inputs K and L increases the output by less than that amount . This implies that the production function exhibits decreasing returns to scale. Hence, option(B) is correct.