Suppose the Production of VCRs Can Be Represented by the Following

question 112

Multiple Choice

Suppose the production of VCRs can be represented by the following production function:
Q = L^0.4 K^0.4.Which of the following statements is TRUE?

• A)The production function has decreasing returns to scale.
• B)The production function has increasing returns to scale.
• C)The production function has constant returns to scale.
• D)Returns to scale vary with the level of output.

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Definitions:

Rational Consumer

An economic concept of a consumer who seeks to maximize utility or satisfaction from goods and services within the constraint of their budget.

Price Increase

A rise in the cost of goods or services, which can be due to various factors such as inflation, increased production costs, or higher demand.

Buckwheat Crop

Refers to the agricultural production of buckwheat, a plant cultivated for its grain-like seeds and as a cover crop.

Inverse Demand

A representation of the demand relationship that expresses price as a function of quantity demanded, illustrating how prices can vary with changes in demand.