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Consider the Production Function Q=[c+aLσ1σ+bKσ1σ]sσ1Q = \left[ c + a L ^ { \frac { \sigma - 1 } { \sigma } } + b K ^ { \frac { \sigma - 1 } { \sigma } } \right] ^ { \frac { s } { \sigma - 1 } }

Question 39

Multiple Choice

Consider the production function Q=[c+aLσ1σ+bKσ1σ]sσ1Q = \left[ c + a L ^ { \frac { \sigma - 1 } { \sigma } } + b K ^ { \frac { \sigma - 1 } { \sigma } } \right] ^ { \frac { s } { \sigma - 1 } }
where CC is some constant different than zero. 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.

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