From the profit maximizing conditions for the Cobb-Douglas production
From the profit maximizing conditions for the Cobb-Douglas production function, we find that the optimal input demands for labor and capital may be related as L = brK/(aw). Under what conditions are the expenditures on capital and labor equal?
A) Constant returns to scale
B) Increasing returns to scale
C) Decreasing returns to scale
D) a = b
ANSWER
D
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