Tutorial 1: The Theory of the Firm WEN? _ Explain the theory of the rm- Outline and describe what is meant by the nature of the rm Compare and contrast the 'production function theory' and 'the Cost theory of the rm'. provides answers to the question: Why do rms exist and What determines their scale and scope? We should allocate inputs across production processes in a rm according to what rule and Why? 'What is an isoquant ctm-'e? 1What is the marginal rate of technical substitution? How does it relate to the isoquant curve? 'Why isn't the isoquant curve a straight line? Tr'. 'What is 'inereasing returns to scale"? Why is it a long run concept? 8. What is 'decreag returns to scale'? Why is it along inn concept? ID. If. 12. 'What is 'oonstant returns to scale'? Why is it a long run concept? Consider the production function f(x], x2) = xi xi Does this exhibit constant, increasing, or decreasing returns to scale? Consider the production function f(xl, x2) =4 xi\" x33. Does this exhibit constant, increasing, or decreasing return to scale? Can a technology exhibit increasing rettHnstoscale even if all of its marginal products are diminishing; if y: xi\" x33 show and explain why