Which of the Following Production Functions Exhibit Constant Returns to Scale

question 47

Multiple Choice

Which of the following production functions exhibit constant returns to scale? In each case y is output and K and L are inputs. (1) y = . (2) y = 3 . (3) y = . (4) y = 2K + 3L.

• A) 1, 2, and 4
• B) 2, 3, and 4
• C) 1, 3, and 4
• D) 2 and 3
• E) 2 and 4

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Definitions:

Linear Supply

A supply relationship showing a direct, constant increase in quantity supplied as price increases.

Free Market Equilibrium

A state in an economy where supply meets demand naturally without intervention, and prices are determined by free market forces.

Price Controls

Government-imposed limits on the prices that can be charged for goods and services in a market.

Consumers Gain

The benefit or surplus that consumers receive from purchasing goods and services at a price lower than their maximum willingness to pay.