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- What is the technological difference between straight line and strictly concave production curves? Show and explain.Distinguish between the following and show their importance in production theory both in terms of graph and empirical way a. Short run and long run b. Fixed input and variable inputDavid Ricardo ([1817] 1965) modified Smith’s model by introducing diminishing returns to land cultivation. Diminishing returns implies that as you apply more of a variable input (labor) to a fixed input (land), the productivity of each additional worker will eventually decline as long as technology isfixed. He claimed that land was of variable quality and finite. Thus, as an economy grows, population grows relative to land, and the productivity of the labor on the land will decline. According to Ricardo, the only way stagnation could be averted, at least temporarily, would be through the trade and imports of cheap food or wage goods. The essential doctrines of John Stuart Mill (1848) differed little, if at all, from those of Ricardo. He, like Smith, believed in the doctrine of laissez-faire , but he also recognized the possibility of modifying the system. He displayed a leaning to the socialist ideal, growing closer as his life advanced. He believed that we should sacrifice economic…
- What is the difference between the labor intensive production and capital intensive production approach.Assume that a competitive economy can be described by a constant returns to scale, Cobb–Douglas, pro- duction function. Suppose that in this economy all factors of production are fully employed. Holding other factors constant, including the quantity of capital and technology, carefully explain how a one-time, 10-percent decrease in the quantity of labor will change labor’s share of total income?True or False A production function in "economics" summarizes the technological relationship between inputs and outputs.
- Shows the lowest possible input costs (combinations of labour and capital) at which different levels of production can be produced a. contraction curve b. contraction path c. expansion path d. expansion curveQ87 Consider a firm that uses only labour and capital as inputs. At the present use of labour and capital, the MP of labour is four times the MP of capital and the price of labour is twice the price of capital. To minimise its costs for a given level of output, the firm should... a. Decrease both capital and labour. b. Increase both labour and capital. c. Decrease capital and increase labour. d. Stay at its present factor mix. e. Decrease labour and increase capital.When do you think production is on the part of increasing returns on the production function? Explain.
- Which of the following statements are true? A basic assumption of the theory of production is that: A firm cannot borrow money to finance its input expenditures. A firm can buy as much labor and capital as it desires in the long-run A firm can reduce the number of workers it uses, but it cannot adjust how much capital it uses in the short-run When the marginal product of labour starts falling, the firm must cease production a. II only b. II and III c. I, III and IV d. II, III and IVWe often work with production technologies that give rise to initially increasing marginal product of labor that eventually decreases. Are the following statements then True or False? Explain.A negative marginal product of labor necessarily implies a downward sloping production frontier at that level of labor input.Homework Study Question 4 - Long Answer Please help me with PART B I understand part A and have already answered it, but part b im not getting! Our closed economy has a production function Y = A•F(K,LxE), where Y, K, L, E & A all have their usual meanings as per our lectures & course textbook. Also, this production function exhibits all the usual mathematical/economic properties we usually assume: positive marginal products, diminishing marginal products, complementarity between K & (LxE), and constant returns to scale. The aggregate consumption function depends negatively on the real interest rate, the government budget is balanced initially & the economy is in both a long-run equilibrium and steady state initially. The population growth rate is 2% per year, capital depreciates at a rate of 3% per year, the saving rate is 25% and technology is constant. Suppose the level of labour effectiveness (E) suddenly permanently rises by 10%. Use the long-run classical model…