Set 4 1. (a) Determine whether the following production functions have Con- stant, Decreasing or Increasing Returns to Scale (a formal proof is required) F (K; L) = K3 L3 F (K; L) = K2 L3 F (K; L) = 2K2 3L2 K L F (K; L) = K0:3L0:7 (b) For the last production function, F (K; L) = K0:3L0:7, suppose the labor force increases by 10% (while capital remains the same). What happens to total output Y (in percent)? 2. Suppose a rm uses both labor L and capital K as inputs to production. Its production func