1. Constant returns for a Cobb-Douglas production function with two inputs
Suppose that the production function is f(x1, x2)=Cxa1xb2, where a,b,C are positive constants.
a. For what positive values of a,b, and C are there decreasing returns to scale?
b. Constant returns to scale?
C. Increasing returns to scale?
Which answers would u choose?
All C>0 and a+b=1
All C>1 and a+b=1
All C>0 and ab<1
All C>0 and a+b<1
All C>0 and a+b>0
All C>0 and a+b>1
All C>1 and a+b>1
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