Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Increasing, constant, and decreasing returns to scale are common. The table shows esti- mates of Cobb-Douglas production functions and returns to scale in various industries.

image text in transcribed
Increasing, constant, and decreasing returns to scale are common. The table shows esti- mates of Cobb-Douglas production functions and returns to scale in various industries. Labor, or Capital, B Scale, y = a + B Decreasing Returns to Scale U.S. tobacco products 0.18 0.33 0.51 Bangladesh glassb 0.27 0.45 0.72 Danish food and beverages 0.69 0.18 0.87 Chinese high technologyd 0.28 0.66 0.94 Constant Returns to Scale Japanese synthetic rubber 0.50 0.50 1.00 Japanese beer 0.60 0.40 1.00 New Zealand wholesale tradef 0.60 0.42 1.02 Danish publishing and printing 0.89 0.14 1.03 Increasing Returns to Scale New Zealand mining 0.69 0.45 1.14 Bangladesh leather products 0.86 0.27 1.13 Bangladesh fabricated metalb 0.98 0.28 1.26 Is it possible that a firm's production function exhibits increasing returns to scale while exhibiting diminishing marginal productivity of each of its inputs? To answer this question, assume a Cobb- Douglas production function and calculate the marginal productivityes of capital and labor for the production of U.S. tobacco products, Japanese synthetic rubber, and New Zealand's mining using the information listed in the Application "Returns to Scale in Various Industries" (see p. 198 of your textbook)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Economics and Business Strategy

Authors: Michael R. baye

7th Edition

978-0073375960, 71267441, 73375969, 978-0071267441

More Books

Students also viewed these Economics questions

Question

1.. What are the typical design elements of a service blueprint?

Answered: 1 week ago