Question 1 (5 marks, 200 words) (a) Thomas Malthus reasoned that because the amount of land is fixed, as population grows and more and more labour is applied to land, the productivity of labour in food production would decline, leading to widespread famine. Malthus’s prediction failed to materialise as advances in technology greatly increased labour productivity in food production. Do such technological advances contradict the law of diminishing marginal returns? (b) Why do you think the motorcar production exhibits strong economies of scale but not the trucking (haulage) industry?
The answers are as follows:
(a) Yes, the technological advances do contradict the law of diminishing marginal returns. Thomas Malthus states that as adding an increase in factor of input such as labour to a fixed factor such as land, the marginal productivity of labour in food production would progressively diminish and the law is based on the premise that the state of the technology is constant, however, advances in technology is promoting in reality. Namely, the land productivity is determined by both physical and technological capability. Simply adding more input of labour that increases physical capacity would not always increases the productivity of land. In this situation, continues development of technology enhance the productivity.

(b) The industry with strong economies of scale has the capability to process production at feasible minimum average cost. Namely, when firms increase their production output, they can produce at a lower cost per unit. For the fixed cost associated with the corresponding production scale, it decreases in average. As the motorcar becomes ordinary transport acquired by people, the demand for motorcar is gets larger than the demand for trucks. It leads to larger quantities of motorcar than trucks to produce. Therefore, motorcar production