1. Indicate whether each of the given statements is true or false and provide the reason,
(a) A firm must stop expanding output after reaching diminishing returns and
(b) if large and small firms operate in same industry, we should have constant returns to scale.
2. If there has been 10 percent increase in consumer income between two periods, determine the percentage change in demand for foreign travel? For tobacco products? For flour?
3. (a) If price of pork increases by 10 percent, by how much does demand for beef change? (b) If price of clothing increases by 10 percent, by how much does demand for food change?