A Firm Has a Production Function F(x, Y) = 1

question 21

Multiple Choice

A firm has a production function f(x, y) = 1.40(x^0.60 + y^0.60) ² whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has

• A) increasing returns to scale.
• B) decreasing returns to scale.
• C) constant returns to scale.
• D) increasing returns to scale if x + y > 1 and decreasing returns to scale otherwise.
• E) increasing returns to scale if output is less than 1 and decreasing returns to scale if output is greater than 1.

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Definitions:

Online Seller

An individual or business that sells goods or services through digital platforms or ecommerce websites.

Aggregated Inventories

Describes the total stock of goods or materials compiled from different locations or categories within a company's supply chain.

Transportation Costs

Expenses associated with the movement of products or materials from one location to another, which can include shipping, fuel, and labor costs.

Distribution

The process of moving goods from production locations to points of sale and ultimately to end consumers.