Suppose You Have a Cobb-Douglas Function with a Capital Elasticity

question 6

Multiple Choice

Suppose you have a Cobb-Douglas function with a capital elasticity of output (á) of 0.28 and a labor elasticity of output (â) of 0.84.What statement is correct?

• A) There are increasing returns to scale
• B) If the amount of labor input (L)is increased by 1%,the output will increase by 0.84%
• C) If the amount of capital input (K)is decreased by 1%,the output will decrease by 0.28%
• D) The sum of the exponents in the Cobb-Douglas function is 1.12.
• E) All of the above

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