Neco 2020 Economics Question 13

Practice objective / multiple choice question 13 from the 2020 Neco Economics examination.

Neco 2020 Economics Objective / Multiple Choice Medium Difficulty
Question 13 NECO • 2020 • ECONOMICS • objective

An economy's production function is \(Q = K^{0.4} L^{0.6}\), where \(K\) is capital and \(L\) is labour.\nIf capital is increased by 20% and labour by 10%, by what percentage does output change? Also state whether the production function exhibits increasing, decreasing, or constant returns to scale.

Answer Options

A. Output falls by 2%; the production function has constant returns to scale
Correct Answer B. Output rises by 14%; the production function has constant returns to scale
C. Output rises by 16%; the production function has increasing returns to scale
D. Output rises by 12%; the production function has decreasing returns to scale
Correct Answer
B
Correct Option:
Output rises by 14%; the production function has constant returns to scale

About This Question

This is Neco 2020 Economics Question 13. It is one of the objective questions from the 2020 Neco Economics examination.

Difficulty level: Medium .

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