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    Question

      If a Cobb-Douglas production is Q = K0.4 L0.6 the function is

    A Increasing return to scale Correct Answer Incorrect Answer
    B Decreasing return to scale Correct Answer Incorrect Answer
    C First increasing and the decreasing return to scale Correct Answer Incorrect Answer
    D Constant return to scale Correct Answer Incorrect Answer
    E Can not be identified Correct Answer Incorrect Answer

    Solution

    Q = K0.4 L0.6 Increase inputs by l Q = ( l K)0.4 ( l L)0.6 = l K0.4 L0.6 = l Q So, output also increases by the same amount. Hence, Constant returns to scale

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