The production function can have increasing returns to scale or decreasing returns to scale -- but it cannot have initially increasing and eventually decreasing returns to scale.

When the credit spread rises, an effective policy response might be to ________

A) lower the real interest rate on safe assets B) prevent the real federal funds rate from falling below zero C) pursue nonconventional monetary policies to restore the functioning of financial markets D) announce swift and stern action against those responsible for the financial disruption

An advantage of using the cross-sectional regression method in estimating production is that

A) the problem of technological change over time is overcome. B) there is no need to adjust data, which are in monetary terms for geographical differences. C) we can assume that all plants operate at their most efficient input combinations. D) All of the above