Hong Kong Outlying Islands Manufacturing Ltd. is a food production firm. The operation of its factory at Lantau Island with size of 10,000 m² produces the following levels of total output of jam per day. Quantity of Quantity of Total product workers machinery (units) (thousand Average product (thousand bottles per machine per day) Marginal product (thousand bottles per machine per day) 4 0 0 --- --- 4 1 2 4 2 5 4 3 9 4 4 12 4 5 14 4 6 15 a) Copy the above table onto your answer book and complete it by (6 marks) calculating the average product and marginal product at each level of machine used in the production. b) Identify the fixed factor(s) and the variable factor(s) used in the (3 marks) production of the Hong Kong Outlying Islands Industrial Ltd. c) According to the above table, at which level of machinery employed (5 marks) does the law of diminishing marginal returns occur? Discuss the reasons for the occurrence of diminishing marginal returns. d) State whether Hong Kong Outlying Islands Manufacturing Ltd. is (2 marks) operating in 'long run' or 'short run'. Explain your answer. e) Distinguish between 'economies of scale' and 'diseconomies of (4 marks) scale'. Is Hong Kong Outlying Islands Manufacturing Ltd. experiencing diseconomies of scale?
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are the size of the factory at Lantau Island (10,000 m) and the quantity of machinery (0-5 units). The variable factor(s) are the total product of jam per day, average product per machine per day, and marginal product per machine per day. Show more…
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