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    The number of boats made in Eurcadia is given by the production function
    Nboats = 1.7 K0.7 L0.4
    where K is the number of machines used to make boats, and L the number of employees who make boats.


    Does the production function for boats imply increasing or diminishing returns to scale? (explain how we can tell). Calculate the number of boats which can be made, in each cell of this table, rounded to the nearest whole number:
    ........ L=0 L=1 L=2 L=3 L=4 L=5 L=6 L=7
    K=10
    K=9
    K=8
    K=7
    K=6
    K=5
    K=4
    K=3
    K=2
    K=1
    K=0


    Any help please??? If I was to make it in excel which formulae is appropriate?
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    I don't have time to write the proof but assuming the production function is a Cobb Douglas production function --> it displays increasing returns to scale. A quick trick is to add the indices together. If they are

    greater than 1 --> increasing returns to scale
    equal to 1 --> constant returns to scale
    less than 1 --> decreasing returns to scale

    It is only a quick trick --> look at Euler for the proof

    Hope this is some help
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    Increasing, the exponents sum to greater than 1.
 
 
 
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