Consider the production function given by
y = f(L,K) = L^(1/2) K^(1/3) ,

where y is the output, L is the labour input, and K is the capital input.

(a) Does this exhibit constant, increasing, or decreasing returns to scale?

(b) Suppose that the firm employs 9 units of capital, and in the short-run, it cannot change this amount. Then what is the short-run production function?

(c) Determine whether the short-run production function exhibits diminishing marginal product of labour.

(d) In the long-run, both inputs are variable. Find the marginal rate of technical substitution (MRTS). If the firm employs L = 15 and K = 20, what does the MRTS tell you?

Answer rating: 100% (QA)

a To determine whether the production function exhibits constant increasing or decreasing returns to scale we need to examine how the output changes w... View the full answer