Suppose That the Production Function Is F(x₁, X₂) = (X^a₁

question 25

Multiple Choice

Suppose that the production function is f(x₁, x₂) = (x^a₁ + x^a₂) b, where a and b are positive constants. For what values of a and b is there a diminishing technical rate of substitution?

• A) For any value of a if b < 1
• B) For any values of a and b if ab < 1
• C) For any values of a and b if a > b
• D) For any value of b if a < 1
• E) None of the above.

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Definitions:

R&D Expenditures

Refers to spending on research and development activities by governments, businesses, or other organizations to innovate or improve products and services.

Economies of Scale

The economic benefits companies achieve through expanding their scale of activity, as the cost for every unit of output falls with the growth in scale.

Income

The financial earnings received by an individual or entity, typically measured over a certain period of time.

Utility-Maximizing

A principle in economics wherein individuals or entities make choices that result in the highest level of satisfaction.