Assuming that the production function is homogeneous of degree one and Euler's equation holds, if (marginal product of labour) is greater than (average product of labour), then
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4 marks, −1MicroeconomicsProduction and returns to scaleReturns to scale and homogeneityHardabout 2 min
CUET-PG 2025 Question 5: Production and returns to scale
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Assuming that the production function is homogeneous of degree one and Euler's equation holds, if MP_L (marginal product of labour) is greater than AP_L (average product of labour), then (A) MP_L will be negative (B) MP_K will be zero. (C) MP_K will be negative. (D) MP_L and MP_K will both be negative
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What this question tests
This question is on Returns to scale and homogeneity, part of Production and returns to scale in Microeconomics.
How output changes when all inputs scale up, including Euler's theorem and the degree of homogeneity.
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