Author Question: The above figure shows the isoquants for producing steel. Decreasing returns to scale are A) ... (Read 55 times)

xroflmao · **on:** Jul 1, 2018

The above figure shows the isoquants for producing steel. Decreasing returns to scale are

A) present when producing more than 10,000 tons.
B) present when producing more than 20,000 tons.
C) present when producing more than 30,000 tons.
D) never present.

Question 2

Describe the characteristics of an efficient contract between a principal and an agent.

What will be an ideal response?

karlss · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

B

Answer to Question 2

An efficient contract is efficient in production. The principal's and agent's combined value of the contract is maximized. An efficient contract is also efficient in risk bearing. The risk sharing is optimal so that a relatively less risk-averse person bears more of the risk.