Question

2 points Save Answer uestion 3 M&T owns a factory that uses only two inputs in its production function: Q = 2KL - 0.6K2 -0.1312 where Q represents the annual output, K represents annual capital input, and L represents annual labor input. Suppose M&T can set up a second identical factory at the same costs. Would you advise M&T to increase its scale of operation? Explain.

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Answer 1

Production function: f(K, L)=Q2 242-0.ok?=B-1322 fc tk, th='{{t61/t17 – 0.6.4 k) = 0.134222² at² [2k2-6.6k²_0.1322] flak, &L) = t² f. CK, 2) > t f (K, 2) So, flek, tL) > t f (K, L) . It is showing increasing returns to scale So. Mat should increase its siele of operation