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.
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