Which of these portfolio items might assist Susan in answering an interviewer who asks, "What is something you did well in schoo
1 answer:
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Answer:
Returns to scale = 1.15
Increasing returns to scale.
Explanation:
Cobb-Douglas production function of the form:
Here, we are using a simple rule of factors to find the returns to scale:
Hence,
By adding up the powers of L and K, we can get the returns to scale.
Returns to scale = 1.15
Suppose, the power of L be 'a' and the power of K is 'b',
if a + b = 1, then it exhibits constant returns to scale
if a + b > 1, then it exhibits increasing returns to scale
if a + b < 1, then it exhibits decreasing returns to scale.
In our case,
a + b = 1.15 which is greater than 1, so this production function exhibits increasing returns to scale.