Intermediate Microeconomics: A Modern Approach, Seventh Edition

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Econ 301 – F06 PROBLEM SET 5 – not due but DO before prelim 2 Wissink 1. Critically evaluate the following statements and explain in what way or ways they are true, false, or uncertain. a. Increasing returns to scale is incompatible with the law of diminishing marginal productivity. b. If the average product of an input is falling, then the average product must exceed the marginal product at that input level. c. A production function with increasing returns to scale produces nothing but decreasing cost curves. d. Knowing a firm's production function is sufficient information for determining the firm's efficient combination of inputs. e. If marginal cost is greater than average cost, then average cost must be falling. f. If marginal cost is rising, then average cost must also be rising. 2. Fill in the blanks in the following table that describes the short-run production function of labor in the production of wine, holding capital constant at K=10.
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