MANAGERIAL ECONOMICS. 15TH DEC. 2017 SECTION B QUESTION FIVE: (a). Determine whether the following production functions exhibit constant, increasing, or decreasing returns to scale. A. Q = 0.5X + 2Y + 40Z B. Q =3L + 10K + 500 C. Q =4A +6B +8AB D. Q =712 + 5LK +2K2 E. Q = 10105K0.3 5 Marks (b). Number Of Output Workers 1 EL 0 0 50 2 110 300 450 590 6 665 7 700 8 725 4 = 9 710 10 705 The table above shows the weekly relationship between output and number of workers for a factory with a fixed size of plant. a. Calculate the marginal product of labor. b. At what point does diminishing returns set in? c. Calculate the average product of labor. d. Find the three stages of production. e. Based on the table above, if the wage rate is $500 and the price of output is $5, how many workers should the firm hire? 6 Marks (c). A firm has two plants, one in the United States and one in Mexico, and it cannot change the size of the plants or the amount of capital equipment. The wage in Mexico is $5. The wage in the U.S. is $20. Given current employment, the marginal product of the last worker in Mexico is 100, and the marginal product of the last worker in the U.S. is 500. a. Is the firm maximizing output relative to its labor cost? Show how you know. b. If it is not, what should the firm do? 4 Marks (d). (i). In economic theory, if an additional worker adds less to the total output than previous