Answer:
Exhibits increasing returns to scale.
Explanation:
Given that,
Cobb-Douglas production function:
[tex]q=10(L)^{0.71}(K)^{0.84}[/tex]
If both inputs are doubled, then
[tex]q=10(2L)^{0.71}(2K)^{0.84}[/tex]
[tex]q=10(2)^{(0.71+0.84)}(L)^{0.71}(K)^{0.84}[/tex]
[tex]q=10(2)^{1.55}(L)^{0.71}(K)^{0.84}[/tex]
Therefore, this Cobb-Douglas production function exhibits the increasing returns to scale because the power of 2 is greater than 1. Under the condition of increasing returns to scale, an increase in the output of the firm is greater than the increase in the input of the firm.
