The Green Revolution (see the Mini-Case “Malthus and the Green Revolution”) was based in part on extensive experimentation. The following data illustrates the relationship between nitrogen fertilizer (in pounds of nitrogen) and the output of a particular type of wheat (in bushels). Each observation is based on one acre of land and all other relevant inputs to production (such as water, labor, and capital) are held constant. The fertilizer levels are 20, 40, 60, 80, 100, 120, 140, and 160, and the associated output levels are 47, 86, 107, 131, 136, 148, 149, and 142.

Use Excel to estimate the short-run production function showing the relationship between fertilizer input and output.

Does fertilizer exhibit the law of diminishing marginal returns? What is the largest amount of fertilizer that should ever be used, even if it is free?