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      Question

      In the context of a CES (Constant Elasticity of

      Substitution) production function, if the substitution parameter rho approaches zero, the function collapses into:
      A A Linear Production Function Correct Answer Incorrect Answer
      B A Leontief Production Function Correct Answer Incorrect Answer
      C A Cobb-Douglas Production Function Correct Answer Incorrect Answer
      D A Concave Production Function Correct Answer Incorrect Answer

      Solution

      The CES function is a general form. When the elasticity of substitution is 1 (which occurs as rho approaches zero), the mathematical limit of the CES function takes the form of the Cobb-Douglas function. If rho approaches infinity, it becomes Leontief; if rho is -1, it becomes linear.

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