Assuming no fixed costs show that if a firm with

Question

Assuming no fixed costs, show that if a firm with Cobb-Douglas production function pays its labor and capital resources the value of their marginal products then it

(a) Earns normal profit if the function is constant return to scale.

(b) Earns above normal profit if the function is decreasing return to scale.

(c) Incurs losses if the function is increasing return to scale.