Question

3. True or false and explain.

Almost all production function exhibit diminishing marginal rate of technical substitution. therefore, all production functions must also exhibit decreasing returns to scale.

Answer 1

Production function

A manufacturing feature represents how inputs are converted into outputs with the aid of using a organization. In particular,

a manufacturing feature describes the most output that a organization can produce for every specified

mixture of inputs. In the quick run, one or greater elements of manufacturing can't be changed,

so a brief-run manufacturing feature tells us the most output that may be produced with different

quantities of the variable inputs, maintaining constant inputs constant. In the long-run manufacturing feature,

all inputs are variable.

The marginal made from hard work is probably to boom first of all due to the fact while there are greater employees,

every is capable of focus on an component of the manufacturing procedure wherein she or he is particularly

skilled. For example, consider the standard speedy meals restaurant. If there's handiest one employee, he's going to need

to put together the burgers, fries, and sodas, in addition to take the orders. Only such a lot of clients may be

served in an hour. With or 3 employees, every is capable of specialize, and the marginal product

(variety of clients served in keeping with hour) is probably to boom as we flow from one to 2 to 3

employees. Eventually, there may be sufficient employees and there may be no greater profits from

specialization. At this point, the marginal product will start to lessen.

manufacturing ultimately revel in diminishing marginal returns to hard work in the

brief run due to the fact

The marginal made from hard work will ultimately lessen due to the fact there may be at the least one constant factor

of manufacturing, along with capital. As an increasing number of hard work is used together with a hard and fast quantity of capital,

there's much less and much less capital for every employee to use, and the productiveness of extra employees

always declines. Think as an example of an workplace in which there are handiest 3 computers. As greater

and greater personnel attempt to percentage the computers, the marginal product of every extra employee will diminish.

So the statement is true .Almost all production function exhibit diminishing marginal rate of technical substitution. therefore, all production functions must also exhibit decreasing returns to scale.