Explore BrainMass

Explore BrainMass

    nature of returns of scale

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Consider the production function Q=100L^.5K^.4. Suppose L=1 and K=1 so that Q=100.

    If L is increased 1 percent, that is to L=1.01 with the capital unchanged, what is the resulting percentage increase in output?

    Describe the nature of returns of scale for this production function.

    © BrainMass Inc. brainmass.com October 10, 2019, 12:15 am ad1c9bdddf

    Solution Preview

    Q=100L^0.5K^0.4 L=1, K=1 Q=1
    Now if L=1.01
    we have Q=100*1.01^0.5*1^0.4=100.499

    To check return ...

    Solution Summary

    The nature of returns of scale is explicated.