Provide a Graph and an Explanation to Show That the Production

question 12

Essay

Provide a graph and an explanation to show that the production function Q = L⁰.⁵ K⁰.⁵ has diminishing marginal product of labor but has constant returns to scale.

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Definitions:

Strictly Convex Preferences

Preferences that demonstrate a consumer's increasing marginal rate of substitution, indicating a strong preference for diversified bundles of goods over homogeneous bundles.

Indifference Curves

Graphs representing different bundles of goods between which a consumer is indifferent, showing the combinations of goods that provide the same level of utility to the consumer.

Marginal Utility

The additional satisfaction or utility a consumer gains from consuming one more unit of a good or service.

Competitive Equilibrium Price Ratio

The ratio of prices that ensures the equality of supply and demand in a competitive market, often used to observe relative price changes between commodities.