Question 9 [4]

In the context of the analysis of the Edgeworth production box (as per the prescribed textbook of Pindyck and Rubinfeld), suppose that a new invention changes the constant returns to scale of the tinned fruit production process into one that exhibits sharply increasing returns.

How does this change affect the production contract curve?

Tip: Relate your answer to the change in isoquants and refer to the marginal rate of technical substitution