Match the items of List - I with the items of List - II and find out the correct matching. List - I…
For a Cobb-Douglas production function, returns to scale depend on the sum of the exponents: in (a) 0.19 + 0.88 = 1.07, which exceeds 1 (increasing returns); in (b) 0.75 +…
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Match the items of List - I with the items of List - II and find out the correct matching.
| List - I (Production functions) | List - II (Name of the shapes of returns to scale) |
|---|---|
| (a) Q = 10.2 K0.19 L0.88 | (i) Constant Returns to scale |
| (b) Q = 1.01 L0.75 K0.25 | (ii) Diminishing Returns to scale |
| (c) Q = 0.84 L0.63 K0.3 | (iii) Increasing Returns to scale |
Answer and explanation
Correct answer C
For a Cobb-Douglas production function, returns to scale depend on the sum of the exponents: in (a) 0.19 + 0.88 = 1.07, which exceeds 1 (increasing returns); in (b) 0.75 + 0.25 = 1.00 (constant returns); and in (c) 0.63 + 0.30 = 0.93, which is below 1 (diminishing returns). Hence (a)-(iii), (b)-(i), (c)-(ii).
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UGC NET Commerce