The following is a Cobb-Douglas production function: Q = 1.75K0.5•L0.5 . What is correct here?
a. A one-percent change in L will cause Q to change by one percent
b. A one-percent change in K will cause Q to change by two percent
c. This production function displays increasing returns to scale
d. This production function displays constant returns to scale
e. This production function displays decreasing returns to scale
d
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Define the terms "economies of scale," "constant returns to scale," and "diseconomies of scale." Among these three situations, operating in which stage is likely to be most profitable for a firm?
What will be an ideal response?
Which of the following is a positive statement?
a. I think we should pass a constitutional amendment to reduce the deficit. b. President Clinton's way of dealing with the economy is better than President Bush's. c. I hope interest rates come down soon. d. If taxes are raised, unemployment will drop.