Suppose the Production of DVD Players Can Be Represented by the Following

question 97

Multiple Choice

Suppose the production of DVD players can be represented by the following production function: q = L^0.4K^0.4. Which of the following statements is (are) TRUE?

• A)The production function has decreasing returns to scale.
• B)The marginal productivity of labor falls as labor increases in the short run.
• C)Capital and labor can be substituted for one another.
• D)All of the above.

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Definitions:

Optimal Consumption Bundle

A combination of goods and services that maximizes a consumer's satisfaction or utility, given their income and the prices of goods and services.

Normal Good

A type of good for which demand increases as consumers' income increases, and vice versa.

Inferior Good

A category of product whose demand falls when the income levels of buyers rise, in opposition to normal goods.

Consumer Choice

The range of preferences and decisions consumers face regarding the use of products, influenced by income, price, tastes, and preferences.