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Q1. The Australian Medical Association (AMA) once called for an immediate 20% cut in medical student intakes to halt what they alleged was a growing oversupply of doctors. "It is a tragic waste of human and economic resources to spend six years training men and women for jobs that will not be needed" said the AMA President. Do you agree with the AMA? Why or why not?Q2. According to the chief engineer at the Zodiac Company, Q=ALaKb, where Q is the output rate, L is the rate of labor input, and K is the rate of capital input. Statistical analysis indicates that a=0.8 and b=0.3. The firm's owner claims the plant has increasing returns to scale.
a. Is the owner correct?b. If b were 0.2 rather than 0.3, would she be correct?c. Does output per unit of labor depend only on a and b? Why or why not?
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