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Gren Plant Holdings farm manager argued that if he increased all four inputs on his farm...

  1. Gren Plant Holdings farm manager argued that if he increased all four inputs on his farm by 1 percent, output would increase by 1 percent. The extension worker argued that the elasticities of the output for each of the four inputs was less than one-fourth; therefore, he said that the farm managers output should increase by more than 1 percent. A graduate of University of Boston of Agriculture Economics sided with the extension worker because, she said …” My thesis research shows that the farm has a linearly homogenous production function.” This just added to the confusion. Can you straighten this out?     Evaluate each of the three statements (by different people) with respect to their logical consistency. Given that the farms production function was homogenous of degree one, who was correct?    

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Rahul Sunny answered 2 years ago
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