A Production Function of the Form Q = 40 L

question 5

Multiple Choice

A production function of the form Q = 40 L^.75 K^.20 exhibits ______ in the long run.

• A)increasing returns to scale
• B)decreasing returns to scale
• C)constant returns to scale
• D)diminishing returns to the variable input

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Definitions:

Vertical Analysis

A method of financial statement analysis in which each line item is listed as a percentage of a base figure from the statement.

Ratio Analysis

An examination of the relationship between two numbers or sets of numbers on financial reports. Analyses of ratios, especially over time, can give a fairly clear picture of how well a company conducts its business.

Statement Analysis

The process of examining financial statements to make business decisions, which often involves assessing profit, liquidity, and solvency among other aspects.