The following production table gives estimates of the maximum amounts of output possible with different combinations of two input factors, X and Y. (Assume that these are just illustrative points on a spectrum of continuous input combinations.)

A. Do the two inputs exhibit the characteristics of constant, increasing, or decreasing marginal rates of technical substitution? How do you know?
B. Assuming that output sells for $3 per unit, complete the following tables:

Y Fixed at 3 Units

C. Assume that the quantity of X is fixed at 2 units. If output sells for $3 and the cost of Y is $120 per day, how many units of Y will be employed?
D. Assume that the company is currently producing 162 units of output per day using 1 unit of X and 3 units of Y. The daily cost per unit of X is $120 and that of Y is also $120. Would you recommend a change in the present input combination? Why or why not?
E. What is the nature of the returns to scale for this production system if the optimal input combination requires that X =Y?

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Units of Y Used Estimated Ouputper Day 210 305 360 421 470 188 272 324 376 421 162 234 282 324 360 130 188 234 272 305 94 130 162 188 210 Units of X used X Fixed at 2 Units Marginal Total Margina Average Revenue Units of PrdProductProductProduct Y Used of Y of Y of F of Y 4 Marginal TotalMargin Average Revenue Units of ProductProduct ProductProduct X Used ofX