Econ 302 ass 9 - Christine Drews Econ 302 Toossi Section 2 Problem set 9 Chapter 9 Appendix Problem 1 Q = 4(K^1/2(L^1/2 = and = therefore = 1 and

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Christine Drews Econ 302 – Toossi Section 2 Problem set 9 5/13/2009 Chapter 9 Appendix Problem 1. Q = 4(K^1/2)(L^1/2) α = ½ and β = ½, therefore α + β = 1, and when this is the case with a Cobb-Douglas problem, the production function has a constant return to scale. This function will fail to satisfy the law of diminishing return unless one of the variables, k or l, is fixed, meaning that this is a short term function. As long as this function is in the long-run, there is no diminishing return. b. Q = a(K^2)b(L^2) α = 2 and β = 2, therefore α + β = 4, and when this is the case with a Cobb-Douglas problem, the production function has an increasing return to scale. This function will fail to satisfy the law of diminishing return unless one of the variables, k or l, is fixed, meaning that this is a short term function. As long as this function is in the long-run, there is no diminishing return. 4.
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This note was uploaded on 04/07/2008 for the course ECON 302 taught by Professor Toossi during the Spring '08 term at University of Illinois at Urbana–Champaign.

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Econ 302 ass 9 - Christine Drews Econ 302 Toossi Section 2 Problem set 9 Chapter 9 Appendix Problem 1 Q = 4(K^1/2(L^1/2 = and = therefore = 1 and

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