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      Question

      Β  If a Cobb-Douglas production is Q = K0.4

      L0.6 the function is
      A Increasing return to scale Correct Answer Incorrect Answer
      B Decreasing return to scale Correct Answer Incorrect Answer
      C First increasing and the decreasing return to scale Correct Answer Incorrect Answer
      D Constant return to scale Correct Answer Incorrect Answer
      E Can not be identified Correct Answer Incorrect Answer

      Solution

      Q = K0.4 L0.6 Increase inputs by l Q = ( l K)0.4 ( l L)0.6 = l K0.4 L0.6 = l Q So, output also increases by the same amount. Hence, Constant returns to scale

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