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Consider the CES Production Function $Q = \left[ a L ^ { \frac { \sigma - 1 } { \sigma } } + b K ^ { \frac { \sigma - 1 } { \sigma } } \right] ^ { \frac { \sigma } { \sigma - 1 } }$

Question 2

Multiple Choice

Consider the CES production function $Q = \left[ a L ^ { \frac { \sigma - 1 } { \sigma } } + b K ^ { \frac { \sigma - 1 } { \sigma } } \right] ^ { \frac { \sigma } { \sigma - 1 } }$ . This production function exhibits:

A) decreasing returns to scale.
B) constant returns to scale.
C) increasing returns to scale.
D) either decreasing or constant returns to scale, but more information is needed to determine which one.

Consider the CES Production Function Q=[aLσ−1σ+bKσ−1σ]σσ−1Q = \left[ a L ^ { \frac { \sigma - 1 } { \sigma } } + b K ^ { \frac { \sigma - 1 } { \sigma } } \right] ^ { \frac { \sigma } { \sigma - 1 } }Q=[aLσσ−1​+bKσσ−1​]σ−1σ​

Multiple Choice

Correct Answer:VerifiedShow Answer

Consider the CES Production Function $Q = \left[ a L ^ { \frac { \sigma - 1 } { \sigma } } + b K ^ { \frac { \sigma - 1 } { \sigma } } \right] ^ { \frac { \sigma } { \sigma - 1 } }$

Correct Answer:
Verified