Question
Consider the production function $f\left(x_{1}, x_{2}\right)=4 x_{1}^{2} x_{2}^{\frac{1}{3}}$. Does this exhibit constant, increasing, or decreasing returns to scale?
Step 1
To do this, we will multiply each input by a constant factor, say k, and see how the output changes. So, let's consider the function g(kx_1, kx_2): g(kx_1, kx_2) = 4(kx_1)^2(kx_2)^(1/3) = 4k^2x_1^2(k^(1/3)x_2^(1/3)) = Show more…
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