All answers should be about Cost and Production.
1- Does optimal use of an input (such as labor) mean maximizing average output (per unit of input)? Explain.
2- “One-tenth of the participants produce over one-third of the output. Increasing the number of participants merely reduces the average output.” If this statement were true, would it be consistent with the law of diminishing returns?
3- Consider the production function Q = 10L – 0.5L2 + 24K -K2 for L and K in the range 0 to 10 units. Does this production function exhibit diminish returns to each input? Does it exhibit decreasing returns to scale? Explain.
4- Comment on the following statement: “Average cost includes both fixed and variable costs, whereas marginal cost only includes variable costs. Therefore, marginal cost is never greater than average cost.”
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