Question #1: Assume the production function of each Russian firm is a constant elasticity of substitution production function, Y = A(Σ=₁α₁x) where Y is the single-output produced by the firm, A is a technological parameters, X; are the inputs of the production process, α are the share parameters, p is the substitution parameters, and v is the degree of homogeneity of the production function. Does the production function have constant, increasing, or decreasing return to scale? (mathematical proof required). Assuming the production function has constant return to scale, what happens to degree of substitutability of the inputs as p approaches its limits -co< p ≤ 1 (no mathematical proof is required, only a detailed discussion).

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