QUESTION 3 a) Differentiate between the following concepts: increasing return to scale, decreasing return to scale and constant return to scale. [6 Marks] b) Characterise the short-run profit maximisation function when input x2is fixed and input x is variable. 1/4 3/4 [4 Marks] c) Given the Cobb-Douglas production function f(x1, x2) = x*x with costs of inputs 1 x1, W = Ksh. 300 per hr and cost for input 2 x2, W2150 per hr. Derive the optimal factors demands. [5 Marks] QUESTION 4 a) Explain the concept of expected utility function. [3 Marks] b) Using the demand for insurance example, explain the risk aversion in uncertain environment for the consumer. [12 Marks]