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FirstMidterm-2011 - AEB 6184 Production Economics Midterm...

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AEB 6184 Production Economics Midterm 2011 1. Thomas Hertel s presidential address to the American Agricultural Economics Association in 2010 examined the Perfect Storm of agricultural production. Increasing incomes around the world has led to expanded demands for agricultural output both because of the increased demand for food and the change in the portfolio of foods demanded (more meats requiring feed grains). At the same time governments have attempted to expand the production of biofuels which at the current time is largely the product of corn. These increased demands can be met either through changes in the acres of agriculture (extensive margins) or the yield per acre (intensive margins). Expansion of the acres used for agricultural production may imply additional conflicts with the growing demand for land for ecological purposes (i.e., reserves for maintaining biodiversity). A critical number in this debate is the elasticity of substitution of land for other inputs used in production. Estimate the elasticity of substitution between Nitrogen,
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