Suppose life expectancy in years (L) is a function of two inputs, health expenditures (H) and nutrition expenditures (N) in hundreds of dollars per year. The production function is L = CH 0.40 N0.60 Beginning with a health input of $400 per year (H = 4) and a nutrition input of $400 per year (N = 4), show that the marginal product of health expenditures and the marginal product of nutrition expenditures are both decreasing. The change in the marginal product of health expenditures (MPH) is AMPH ΔΗ = and the change in the marginal product of nutrition expenditures (MPN) is AMPN ΔΝ Does this production function exhibit increasing, decreasing, or constant returns to scale? This production function exhibits A. first decreasing and then increasing returns to scale. B. constant returns to scale. C. decreasing returns to scale. D. increasing returns to scale. E. first increasing and then decreasing returns to scale.

Suppose life expectancy in years (L) is a function of two inputs, health expenditures (H) and nutrition expenditures (N) in hundreds of dollars per year. The production function is L = CH 0.40 N0.60 Beginning with a health input of $400 per year (H = 4) and a nutrition input of $400 per year (N = 4), show that the marginal product of health expenditures and the marginal product of nutrition expenditures are both decreasing. The change in the marginal product of health expenditures (MPH) is AMPH ΔΗ = and the change in the marginal product of nutrition expenditures (MPN) is AMPN ΔΝ Does this production function exhibit increasing, decreasing, or constant returns to scale? This production function exhibits A. first decreasing and then increasing returns to scale. B. constant returns to scale. C. decreasing returns to scale. D. increasing returns to scale. E. first increasing and then decreasing returns to scale.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.14P

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