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ps5sol_09 - Cornell University Economics 3130 Problem Set 5...

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Cornell University Economics 3130 Problem Set 5 Solutions 1. True/False/Explain. State whether each of the following is true or false, and explain why. Please limit your answers to no more than two sentences. All credit is based on the explanation. (a) If a production function has decreasing marginal products in each of its inputs, then it cannot exhibit increasing returns to scale. False. Consider f ( x ) = x . 5 1 x . 5 2 x . 5 3 or f ( x ) = x . 75 1 x . 75 2 . (b) If a production function has constant marginal products in each of its inputs, then it must exhibit constant returns to scale. False. See 2(b) below. (c) (Exercise 11A.8 from the text) If the Law of Diminishing Marginal Product did not hold in the dairy industry, I could feed the entire world with milk from a single cow. True. Every ounce of feed given to a single cow results in more milk from the cow. If the law of diminishing marginal product of feed does not hold, I can keep feeding a cow and I will get the cow to produce the same incremental amount of milk from each additional ounce of food. At some point, I will have given the cow
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