A Firm Has the Production Function F(x, Y) = X¹

question 15

Multiple Choice

A firm has the production function f(x, y) = x^1.40y^1.40. This firm has

• A) constant returns to scale.
• B) decreasing returns to scale and increasing marginal product for factor x.
• C) decreasing returns to scale and diminishing marginal product for factor x.
• D) increasing returns to scale and decreasing marginal product for factor x.
• E) None of the above.

---

Definitions:

Capital Lease

A long-term lease agreement that allows a lessee to use an asset while essentially treating it as if it were their own by recognizing it on their balance sheet.

Compounded Quarterly

The method of figuring out interest that includes both the original principal amount and the interest that has compounded from earlier periods, calculated every three months.

Long Term Liability

A financial obligation of a company that is due for a period exceeding one year, including bonds payable, long-term loans, lease obligations, and pension obligations.

Future Value

The amount of money an investment will grow to over a period of time at a specified interest or growth rate.