For q = L^0.6 K^0.6, the firm has

constant returns to scaleCorrect answerYour answerdecreasing returns to scale, since each exponent is below 1Correct answerYour answerincreasing returns to scale, since 0.6 + 0.6 > 1Correct answerYour answernegative returns to scaleCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

Scaling both inputs by t multiplies output by t^(0.6 + 0.6) = t^1.2.
t^1.2 > t for t > 1, so output rises more than in proportion.

Worth noting

Each exponent below 1 means diminishing returns to each factor alone, not decreasing returns to scale.

Concept: Sum of exponents above one
Typical timeTypical: 100 s
Your timeYours: —

The rule this testsReturns to scale

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For q = L^0.6 K^0.6, the firm has

Explanation