Consider the following production function:

\[
Y=K+2 N
\]

a. Suppose that \(K=10\) and \(N=20\). What is the value of \(Y\) ?

b. Suppose that \(K\) and \(N\) triple. What happens to \(Y\) ?

c. How would you qualify the returns to scale for this function?

d. Write this function as a relation between output per worker and capital per worker.

e. Suppose \(K / N=2\). What is the value of \(Y / N\) ? What happens to \(Y / N\) if \(K / N\) is doubled?

f. Does the relation between output per worker and capital per worker exhibit the same returns to scale as the above production function?
g. What is the difference between the two functions?
h. Plot the relation between output per worker and capital per worker. How does the shape of the relationship between the two compare with Figure 10. 4?

Figure 10-4

Transcribed Image Text:

Output per worker, Y/N D' C' to A Y/N = F(K/N, 1) B Capital per worker, K/N