Michael's Dairy farm production function is given by y(K, L) = 2 
, where K is the number of machine milkers and L is the amount of labor hours he uses. Does this production function exhibit increasing, constant or decreasing returns to scale? Holding the number of machine milkers constant at 16, is the marginal product of labor increasing, constant or decreasing as more labor is used?
Definitions:
Selling Price
The amount of money customers pay for a product or service.
CVP Model Assumptions
Assumptions underlying the Cost-Volume-Profit analysis, including constant unit selling prices, variable costs per unit, and total fixed costs.
Product Mix
The variety of products a company offers to its customers, encompassing breadth, depth, and diversity of the product lines.
Linear Cost Behaviour
A cost behavior where costs change in direct proportion to changes in volume of activity.
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