Answer to Question #105025 in Microeconomics for Esmeralda

Question

Suppose The Information Below Characterizes An Economy: Employment (in Millions) Real GDP (in Billions) 1 200 2 700 3 1,100 4 1,400 5 1,650 6 1,850 7 2,000 8 2,100 9 2,170 10 2,200 Construct The Aggregate Production Function For This Economy. What Kind Of Returns Does This Economy Experience? How Do You Know? Assuming That Total Available Employment ...

Answer 1

The aggregate production function describes how total real gross domestic product (real GDP) in an economy depends on available inputs (labor in our case).

This economy shows decreasing returns because GDP increases by lower amount with each additional amount of labor added.