[20 points] Consider the following two production functions: q(K, L)=KB Suppose that a 1 and B=1...

 

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[20 points] Consider the following two production functions: q(K, L)=KB Suppose that a 1 and B=1 q(K,L)-Ka+LB (a) Does production function I have increasing, constant, or diminishing returns to scale? Explain. (b) Does production function 2 have increasing, constant, or diminishing returns to scale? Explain. [20 points] Consider the following two production functions: q(K, L)=KB Suppose that a 1 and B=1 q(K,L)-Ka+LB (a) Does production function I have increasing, constant, or diminishing returns to scale? Explain. (b) Does production function 2 have increasing, constant, or diminishing returns to scale? Explain.

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3 9 I KL K B KL We multiply the factor variable by a constant Say R qKL K LB but 2 1 B i ... View the full answer