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The Cobb–Douglas Production Function

The Cobb–Douglas Production Function

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that they sum to 1. In that case we’d get increasing returns to scale if C >1 and decreasing returns to scale if C <1. 5 Factor shares You may be familiar with this point from microeconomics: in a “perfectly competitive” economy, profit-maximizing behavior on the part of firms tends to ensure that the factors of production are

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