A Firm Has a Production Function F(x, Y) = 2(x⁰

question 30

Multiple Choice

A firm has a production function f(x, y) = 2(x^0.90 + y^0.90) ⁵ whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has

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

---

Definitions:

Taxable Income

The amount of income that is subject to taxation, after all deductions and exemptions are applied.

Pension Plan

A financial program set by an employer to provide retirement income to employees.

Contractual Agreement

A legally binding contract that outlines the terms and conditions between parties.

Bond Financing

Raising capital for a business or governmental entity through the issuance of bonds, which are debt securities that must be repaid with interest.