Is it possible to have a production function that exhibits both a diminishing marginal product of labor and constant returns to scale? Explain
What will be an ideal response?
Yes is it possible. Under constant returns to scale, both labor and capital are increased at the same time, increasing output by the same proportion. Under the law of diminishing returns, labor alone is increased while holding other factors of production, particularly capital, constant. As a result, output will not change proportionally and the marginal product of labor declines.
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Which of the following is a danger of high rates of inflation?
a. Price changes encourage long-term contracts at the expense of short-term contracts. b. Rapid price changes reduce uncertainty. c. Inflation increases the real value of assets, such as stocks and bonds. d. Inflation will encourage people to spend less time producing and more time trying to protect the value of their assets.
If the price level increased from 200 to 250, then what was the inflation rate?
a. 50 percent b. 25 percent c. 20 percent d. None of the above is correct.