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Question Description

The case:

Daewoo Express is the first and the biggest foreign investment Company with an advanced and organized transport system in Pakistan. It is the only transport company to have a nationwide network with various international trade links. Daewoo Express has been rendering transport facilities since its inception in 1997 to the people of Pakistan. It is appreciated by the masses as well as by the Governments of Pakistan and Korea for its consistent success.

Let’s consider the following Cobb-Douglas production function for Daewoo Express in Pakistan.

 

Q = 1.4L.25k0.72F0.15

Where,

Q = Output in millions of passenger miles

L = Labor input in worker hours

K = Capital input in bus transit hours

F = Fuel input in gallons

Requirement:

Keeping in view the Cobb-Douglas production functions of Daewoo Express Company, identify that under which scales of production the Daewoo Express Company is running and why?

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