2. Do the following production functions exhibit constant, decreasing, or increasing returns to scale?

Question: 2. Do the following production functions exhibit constant, decreasing, or increasing returns to scale? (Explain your answer) 1) y(x1, x2) = 2×1 x2 2) y(x1, x2) = 17×1¹/3×2³/4 3) y(x1, x2) = x1³/5×2¹/5
Show transcribed image textAnswer. 1) in order to determine whether the production function shows constant return decreasing return or increasing return we will put the value of the factors X1 and X2. Let, X1 = X2 = 1 Put values Y* = (1/2)(1) 1 = 1.5 Now we will double the i…View the full answerTranscribed image text: 2. Do the following production functions exhibit constant, decreasing, or increasing returns to scale? (Explain your answer) 1) y(x1, x2) = 2×1 x2 2) y(x1, x2) = 17×1¹/3×2³/4 3) y(x1, x2) = x1³/5×2¹/5