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1. Consider the production function f(x1, x2) = x2 1x2 2. Does this exhibit constant, increasing, or decreasing returns to scale? 2. Consider the production

1. Consider the production function f(x1, x2) = x2 1x2 2. Does this exhibit constant, increasing, or decreasing returns to scale?


2. Consider the production function f(x1, x2)=4x 1 2 1 x 1 3 2 . Does this exhibit constant, increasing, or decreasing returns to scale? 


3. The Cobb-Douglas production function is given by f(x1, x2) = Axa 1xb 2. It turns out that the type of returns to scale of this function will depend on the magnitude of a + b. Which values of a + b will be associated with the different kinds of returns to scale? 


4. The technical rate of substitution between factors x2 and x1 is −4. If you desire to produce the same amount of output but cut your use of x1 by 3 units, how many more units of x2 will you need? 


5. True or false? If the law of diminishing marginal product did not hold, the world’s food supply could be grown in a flowerpot. 


6. In a production process is it possible to have decreasing marginal product in an input and yet increasing returns to scale?

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