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Does output per unit of labor depend only on a and b value

According to the chief engineer at the Zodiac Company, Q=AL^aK^B, where Q is the output rate, L is the rate of labor input, and K is the rate of capital input. Statistical analysis indicates that a=0.8 and B=0.3. The firm's owner claims the plant has increasing returns to scale.

a. Is the owner correct?

b. If B were 0.2 rather than 0.3 would she be correct?

c. Does output per unit of labor depend only on a and B? Why or why not?

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Solution Preview :

Prepared by a verified Expert

Microeconomics: Does output per unit of labor depend only on a and b value

Reference No:- TGS0513742

Have a Question? (oR Write a Review)

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Solution Preview :

Prepared by a verified Expert

Microeconomics: Does output per unit of labor depend only on a and b value

Reference No:- TGS0513742

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