# Question: Suppose that the production function zF K N exhibits increasing returns

Suppose that the production function zF(K, N) exhibits increasing returns to scale, to the extent that the marginal product of labor increases when the quantity of labor input increases.

(a) Given this production function, what will be the representative firm's demand for labor?

(b) What problems do you see this presenting; for example, if we try to build a competitive equilibrium model with increasing returns to-scale production?

(a) Given this production function, what will be the representative firm's demand for labor?

(b) What problems do you see this presenting; for example, if we try to build a competitive equilibrium model with increasing returns to-scale production?

## Relevant Questions

Supposing that a single consumer works for a firm, the quantity of labor input for the firm, N, is identical to the quantity of hours worked by the consumer, h – l. Graph the relationship between output produced, Y on the ...Suppose that the representative consumer's preferences change, in that his or her marginal rate of substitution of leisure for consumption increases for any quantities of consumption and leisure.(a) Explain what this change ...What does the DMP model predict would be the effects of labor-saving devices in the home, for example dishwashers, washing machines, and vacuum cleaners? Use diagrams to show the effects on the unemployment rate, the vacancy ...In the Solow growth model, suppose that the marginal product of capital increases for each quantity of the capital input, given the labor input.(a) Show the effects of this on the aggregate production function.(b) Using a ...If total factor productivity decreases, determine using diagrams how this affects the golden rule quantity of capital per worker and the golden rule savings rate. Explain your results.Post your question