Consider the Production Function Y=4F(L,K,H,N)

question 112

Essay

Consider the production function Y=4F(L,K,H,N). Suppose F(10, 8, 6, 5) = 100 and F(30, 24, 18, 15) = 300. Does the production function have the property of constant returns to scale? Why or why not?

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Definitions:

Capital Budgeting Models

Techniques used to evaluate the financial attractiveness of investment projects, including Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period.

After-Tax Cost

The expense associated with any financial transaction or investment after accounting for the effects of taxes, often used in net present value calculations.

Before-Tax Cost

Expenses or costs that are calculated without considering the effect of taxes.

Common Stock

The security representing ownership of a corporation. Equity.