If Output Is Described by the Production Function Y =

question 118

Multiple Choice

If output is described by the production function Y = AK0.2L0.8, then the production function has:

• A)constant returns to scale.
• B)diminishing returns to scale.
• C)increasing returns to scale.
• D)a degree of returns to scale that cannot be determined from the information given.

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Definitions:

Variable Costing

A costing method that includes only variable production costs - direct materials, direct labor, and variable manufacturing overhead - in the cost of a product.

Variable Production Costs

Costs that fluctuate with the level of output production, such as raw materials and direct labor.

Variable Costing

An accounting method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in product costs.

Fixed Manufacturing Overhead

The set costs associated with producing goods that do not change with the level of output, including salaries, rent, and insurance.