Answer the following question.

1. Explain why it is still useful to pursue forecasting even though it is often off the mark by wide margins.
2. The following table presents data on three leading indicators for a three-month period. Construct the composite index (with each indicator assigned equal weight) and the diffusion index. NOTE: Revised P7: Just construct the diffusion index from month 2 to 3. In this problem, we have three leading indicators. The diffusion index from month 1 to 2 is 66.7 (=2/3) because two indicators move up and move down.
3. How is the law of diminishing returns reflected in the shape of the total product curve?
4. What is the relationship between diminishing returns and the stages of production?
5. Minimum wage legislation requires most firms to pay workers no less than the legislated minimum wage per hour. Using marginal productivity theory, explain how a change in the minimum wage affects the employment of unskilled labor.
6. Indicate whether each of the following statements is true or false and give the reason

(a) A firm should stop expanding output after reaching diminishing returns

(b) if large and small firms operate in the same industry, we must have constant returns to scale.

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