From the Profit Maximizing Conditions for the Cobb-Douglas Production Function

question 129

Multiple Choice

From the profit maximizing conditions for the Cobb-Douglas production function, we find that the optimal input demands for labor and capital may be related as L = brK/(aw) . Under what conditions are the expenditures on capital and labor equal?

• A) Constant returns to scale
• B) Increasing returns to scale
• C) Decreasing returns to scale
• D) a = b

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