Consider the Production Function $Q = \left[ c + a L ^ { \frac { \sigma - 1 } { \sigma } } + b K ^ { \frac { \sigma - 1 } { \sigma } } \right] ^ { \frac { \sigma } { \sigma - 1 } }$

question 83

Multiple Choice

Consider the production function $Q = \left[ c + a L ^ { \frac { \sigma - 1 } { \sigma } } + b K ^ { \frac { \sigma - 1 } { \sigma } } \right] ^ { \frac { \sigma } { \sigma - 1 } }$ where $c$ is some constant different than zero. This production function exhibits:

• A)decreasing returns to scale.
• B)constant returns to scale.
• C)increasing returns to scale.
• D)either decreasing or constant returns to scale, but more information is needed to determine which one.

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Definitions:

Complex Capital Structures

Refers to corporate financial structures that feature a mix of simple and intricate financial instruments, such as multiple classes of stock or convertible bonds.

Cash Dividend

A distribution of a company's profits to its shareholders in the form of cash.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its current assets.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuing company's shares at certain times during its life, usually at the discretion of the bondholder.