1. Explain the Law of Diminishing Returns. To do that: a) Consider all pertinent variables to include in your analysis. b) Provide data and graphs to support your answer(s).

2. Discuss the nature of "returns to scale" associated with production processes. Also, explain the reason(s) average costs decrease, remain constant, and increase over time and how all these changes will impact the firm's output.

3. Assume, that you are managing the production of shoes in a manufacturing company. Which production costs would you focus your attention on to make sure that the company is not operating at a loss? Justify your answers.

4. Assume that the price of gasoline increases. Assume furthermore that gasoline is a variable input in the production process of that firm. What will happen to the firm's costs of production? Use data and diagrams to support your answers.

5. Discuss the ways a firm can minimize production costs in the long-run.

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1 Law of Diminishing Returns a The Law of Diminishing Returns states that as the quantity of one input such as labor or capital is increased while other inputs are held constant the marginal output ev... View the full answer