1.Give the definition of increasing, decreasing, and constant returns to scale. Include in your answer factors that could cause increasing and decreasing returns to scale.
2.The Cobb-Douglas production function is given Q = 0.4L0.2K 0.7, where Q is the number of parts produced, L is the number of workers, and K is the amount of capital.
a.Calculate the output elasticity both labour and capital.
B Does this production function exhibit increasing, decreasing, or constant return to scales?