1.) Carefully define returns to scale and explain how this differs from marginal returns.
2.) Assume that your brewery employs labor and capital by paying $50 per unit of labor employed and $150 per hour to rent a unit of capital. Given that the production function is: Q = 10L – L^2 + 60K – 1.5K^2, where Q is total output, L is labor, and K is capital, what is the brewery's optimal combination of capital and labor?
3.) Briefly describe the economic cost of a college graduate serving two years in the Peace Corps, an American volunteer program, in a remote Kenyan village.
4.) "All fixed costs are sunk costs, and all sunk costs are fixed costs." Examine the validity of this statement.