Question: QUESTION QUESTION 8 Suppose that the production function y-f(x_1.x_2) (where: y is output level, x_1 is a variable input and x_2 is a fixed input),

QUESTION QUESTION 8 Suppose that the production function y-f(x_1.x_2) (where: y is output

QUESTION 8 Suppose that the production function y-f(x_1.x_2) (where: y is output level, x_1 is a variable input and x_2 is a fixed input), is plotted in the (y,x_1) space. According to economic theory, we would expect: Oay to increase with x_1 at a decreasing rate, due to increasing returns to scale. Oby to increase with x_1 at an increasing rate, due to diminishing returns to scale. Oy to increase with x_1 at a decreasing rate, due to diminishing returns to scale. Ody to increase with x_1 at an increasing rate, due to increasing returns to scale.

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