In the Cobb-Douglas Production Function $Y = \bar { A } K ^ { 1 / 3 } L ^ { 2 / 3 }$

question 77

Multiple Choice

In the Cobb-Douglas production function $Y = \bar { A } K ^ { 1 / 3 } L ^ { 2 / 3 }$ , defining y = Y/L as output per person and k = K/L as capital per person, the per person production function is:

• A) \(y = \bar { A } / k ^ { 2 / 3 }\)
• B) \(y = \bar { A } k ^ { - 1 / 3 }\)
• C) \(y = \bar { A } k ^ { 2 / 3 }\)
• D) \(y = \bar { A } k ^ { 1 / 3 }\)
• E) None of these answers are correct.

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Definitions:

Economies Of Scale

Economies of scale are cost advantages reaped by companies when production becomes efficient, as the cost per unit of output decreases with the increase in scale of operation.

Natural Monopoly

An industry that realizes such large economies of scale that single-firm production of that good or service is most efficient.

Profit-Maximizing Price

The price at which a firm can sell its product to earn the maximum possible profit on those sales.

Marginal Revenue

The additional income from selling one more unit of a good; it is the change in total revenue from an additional unit sold.