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Setler
28 days ago
7

A​ Cobb-Douglas production function A. exhibits decreasing returns to scale. B. can exhibit​ constant, increasing, or decreasing

returns to scale. C. exhibits constant returns to scale. D. exhibits increasing returns to scale.
Social Studies
1 answer:
tia_tia [1.3K]28 days ago
8 0

Answer:

The accurate response is C) demonstrates constant returns to scale

Explanation:

The Cobb-Douglas production function can be expressed as:

F(K,L) = A× Kα × Lα-1

Where:

  • A = Total factor productivity
  • K = Capital
  • α = Proportion of income attributed to capital
  • L = Labor

This formulation implies that income is allocated among capital and labor holders (workers) in relatively equal shares over time. Like the basic production function F(K,L) = K × L, it exhibits constant returns to scale.

<pthe concept="" of="" constant="" returns="" to="" scale="" indicates="" that="" if="" the="" production="" factors="" capital="" and="" labor="" are="" scaled="" up="" by="" a="" specific="" ratio="" output="" will="" increase="" proportionately.=""> </pthe>
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