Scenario 12-1

question 381

Multiple Choice

Scenario 12-1. An economy's production form takes the form Y = AF(L, K, H, N) .
-Refer to Scenario 12-1. If the production function has the constant-returns-to-scale property, then if we know the values of A, K/L, H/L, and N/L, we also know the value of

• A)output.
• B)labor productivity.
• C)A.
• D)All of the above are correct.

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Definitions:

Diseconomies of Scale

A condition when a company or business grows so large that the costs per unit increase, leading to reduced efficiency.

Constant Returns to Scale

A situation in production where an increase in the quantity of inputs leads to a proportional increase in the quantity of output.

Economic Cost

A payment that must be made to obtain and retain the services of a resource; the income a firm must provide to a resource supplier to attract the resource away from an alternative use; equal to the quantity of other products that cannot be produced when resources are instead used to make a particular product.

Average Total Cost

The total cost of production divided by the quantity produced, representing the cost per unit of output.