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6) A firm has a production function q=KL, where q is the quantity of output, K is the amount of
capital and L is the amount of labor. a) Does this production function exhibit increasing,
decreasing or constant returns to scale? b) Does the long-run cost function exhibit economies of
scale or diseconomies of scale? Is the LR Average Cost curve increasing or decreasing with q?

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  • 1. 6) A firm has a production function q=KL, where q is the quantity of output, K is the amount of capital and L is the amount of labor. a) Does this production function exhibit increasing, decreasing or constant returns to scale? b) Does the long-run cost function exhibit economies of scale or diseconomies of scale? Is the LR Average Cost curve increasing or decreasing with q?