Consider the Following Production Function $Y = A \times K ^ { a } \times L ^ { 1 - a }$

question 76

Multiple Choice

Consider the following production function $Y = A \times K ^ { a } \times L ^ { 1 - a }$ ?. If a = 0.5, over the past year output grew by 2 percent, total factor productivity grew 1 percent , and labor grew by 1 percent, capital grew by

• A)1 percent.
• B)0.5 percent
• C)2 percent.
• D)2.5 percent.

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Definitions:

Efficient Scale

The level of production that minimizes the average total cost of producing a good or service. It represents the most cost-effective point of operation for a business.

Maximum Profit

The highest possible profit a firm can achieve when it has optimized its production and sales, given the constraints of the market.

Long-Run Adjustment

The process through which inputs and outputs fully adjust to changes in the market, considering all potential variable and fixed costs.

Zero Profit

A situation where a firm's total revenue is exactly equal to its total costs, resulting in no net profit.