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

question 8

Multiple Choice

A firm has a production function f(x, y) = 1.80(x^0.80 + y^0.80) ¹ whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has

• A) increasing returns to scale.
• B) constant returns to scale.
• C) decreasing 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:

Product Flow

The movement of goods from supplier to customer through various stages of production, storage, and distribution.

Funds Flow

The movement of money into and out of a company, showing how financial resources are allocated.

Cyclical

Describing fluctuations in economic activity, markets, or prices that occur in regular or predictable cycles, often related to changes in business or economic conditions.

Network

A connected system of individuals, devices, or organizations designed to distribute information or resources efficiently.