Obstract Algera

Obstract Algera

Question 1 (a)

Q = 0.2x + 6y + 78z

Solution

Introducing the multiplier “m” in the production function, we get:

Q = 0.2(mx) + 6(my) + 78(mz)

i.e. Q = m[0.2x + 6y + 78z]

or Q = m*Q

We have Constant Returns to scale.

Question 1 (b)

Q = 0.8L2 + 3.5LK + 3.8K2

Solution

Introducing the multiplier “m” in the production function, we get:

Q = 0.8(mL)2 + 3.5(mL)(mK) + 3.8(mK)2

Q = m2 (0.8L2 + 3.5LK + 3.8K2)

Q = m2* Q

We have Increasing Returns to scale.

Question 1(c)

Q = 5A + 5B + 3.8AB

Solution

Introducing the multiplier “m” in the production function, we get:

Q = 5(mA) + 5(mB) ...