Which of the following production functions exhibit constant returns to scale?I. Q=6−q^4II. Q=2K+LIII. Q=K^0.8 L^0.2
1 answer:
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Answer:
c. half of the order quantity
Explanation:
Based on the constant demand assumption in the economic order quantity (EOQ) model, the average cycle inventory is <u>half of the order quantity</u>
Economic order quantity is a quantity which minimizes the ordering cost and holding cost
Q = EOQ = where D = Demand unit, S = Order cost and H = Holding cost
- Ordering cost and the Holding at EOQ will be same
- Average inventory = Q/2
- Average inventory is the half of the order quantity.