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In Cobb-Douglas production function, Q = AKaLß increasing returns to scale occurs when

In Cobb-Douglas production function, Q = AKaLß increasing returns to scale occurs when Correct Answer a + b > 1

The correct answer is a + b > 1

Key Points Cobb-Douglas production function:

  • The Cobb-Douglas production function is based on Paul H. Douglas and C.W. Cobb's empirical analysis of the American manufacturing industry.
  • It is a degree one linear homogeneous production function that considers two inputs, labour and capital, for the total output of the manufacturing industry.
  • The Cobb-Douglas production function is expressed as Q = AKaLß
    where Q is output and L and С are inputs of labour and capital, respectively. A, a and β are positive parameters where = a > O, β > O.

Important Points The Cobb Douglas production function exhibits the three types of returns:

  • If a+b>1, there are increasing returns to scale.
  • If a+b=1, we get constant returns to scale.
  • If a+b<1, we get decreasing returns to scale.

Related Questions

Consider the following statements-
1. The increasing returns to scale imply that the marginal product of a variable factor will always increase.
2. The constant returns to scale imply that the marginal product of a variable factor will always diminish
3. Managerial diseconomies constitute an important cause of decreasing returns to scale
Which of these statements is/are correct?
Consider the following statements-
If all the factors of production are paid according to their respective marginal products, the total product would be
1. exhausted under constant returns to scale.
2. more than exhausted under increasing returns to scale
3. less than exhausted under decreasing return to scale
Which of these statements is/are correct?
Assertion A): U-shaped long-run average cost curve is based on the assumption that economies of scale prevails at small levels of production and diseconomies of scale prevails at larger level of production. Reason R): Decreasing returns to scale arises primarily because as the scale of operation increases, it becomes even more difficult to manage the firm effectively. In the context of the above two statements, which one of the following codes is correct?
Four students are looking at a map of India with scale of 1 cm = 100 km. Student 1: Let's draw a large scale map our colony now. Student 2: Why do you feel we need a large paper to draw our colony? A small one is enough. Student 3: Large scale does not mean large paper. We need to change the scale. Let's make it 1 cm = 500 km. Student 4: No no, since we only need to draw our colony, a centimeter can show much less distance. Arrange the four students in increasing order of the conceptual clarity (i.e. from least clear to most clear)
"The increasing returns to scale occurs because larger scale provides greater specialisation to various factors" according to
What is the APGAR scale? A. Scale to measure the height of mountains B. Time Measuring Scale C. Scale to determine the physical condition of a newborn D. Longevity scale
Arrange in the correct sequence from the lowest to the highest scale of measurement.
1. Interval scale
2. Ordinal scale
3. Ratio scale
4. Nominal scale
If all inputs are increased in the same proportion, than it is the case of
1. short-run production function
2. long-run production function
3. laws of variable proportion
4. laws of returns to scale
Select the correct answer
The given bar graph represents data of the production of paper (in ten lakh tonnes) by three different companies X, Y and Z during the years 2008 to 2012. The x-axis shows the 'years' and the y-axis represents the 'production of paper (ten lakh tonnes)'. (Note: The data shown is only for mathematical exercise. They do not represent actual figures.)  The total production of Company Y during 2008 and 2009 and Company X for 2011 and 2012 taken together is p% (p is correct to the nearest integer) more than the total production of Company Z during 2010, 2011 and 2012. The total production of Company Z during 2008 and 2009 taken together is q% (q is correct to the nearest integer) less than the total production of Company X during 2008, 2009 and 2012 and Company Y during 2010 and 2011 all together.  What is the positive difference between p and q ? 
There are five crude oil refining companies in India namely, A, B, C, D, and E. Statements: I. The production of Company B is more than that of Company A but not more than that of Company E. II The production of Company C is more than the production of Company B but NOT as much as that of Company D. III. The production of E is NOT as much as the production of Company D. Which of these statements is/are sufficient to answer the question that the production of which of the following companies is the highest?