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The Case:

Ahmad Builders Private Limited is a construction company which is operating with large number of labor, huge amount of capital and advanced level of technology. Management of the company knows that marginal product of capital and marginal product of labor depend on both the quantity of capital and quantity of labor used in the production. Suppose a hypothetical study was conducted on this company which revealed the following Cobb-Douglas Production Function.

 

Q = 1.5L0.35K0.65T0.15

Where, Q = Output, L = Labor, K = Capital, T = Technology

Requirement:

Being a student of managerial economics, identify the type of returns to scale under which the company is operating. Describe the reason also.

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