Which of the Following Is True

question 26

Multiple Choice

Which of the following is true?

• A) The Cobb-Douglas production function is given by the general formula Q = AL^αK^β and the constant elasticity of substitution is equal to 0.
• B) The Cobb-Douglas production function is given by the general formula Q = AL^αK^β and the constant elasticity of substitution is equal to 1.
• C) The Cobb-Douglas production function does not exhibit a constant elasticity of substitution.
• D) The Cobb-Douglas production function always takes the form Q = K² L².

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Definitions:

Diminishing Returns

A principle stating that as investment in a single area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other inputs remain constant.

Marginal Product

The additional output generated by employing one more unit of a particular input, holding all other inputs constant.

Hiring Labor

The process of engaging individuals to perform services or work for compensation.

Stock Prices

The current market price of a share of a company's stock, reflecting investor perceptions of the company's future financial prospects.