(a) For Njoki's Pizza restaurant, explain whether each of the following is a fixed cost or a variable cost.

(i) The KSh.3000-per-month payment she makes to her local newspaper for running her weekly advertisements. [2 Marks]

(ii) The lease payment she makes to the landlord who owns the building where her store is located. [2 Marks]

(b) Mutuku owns a copier store. He leases two copy machines for which he pays KSh. 2000 per day. He cannot increase the number of machines he leases without giving the office machine company six weeks' notice. He can hire as many workers as he wants at a cost of Ksh. 400 per day per worker. These are the only two inputs he uses to produce copies. Fill in the remaining columns in the following table. [6 Marks]

(c) A student argues: "To maximize profit, a firm should produce the quantity where the difference between marginal revenue and marginal cost is the greatest. If a firm produces more than that quantity, then the profit made on each individual will be falling." Briefly explain whether you agree with his reasoning. [4 marks]

(d) Frances sells pencils in the perfectly competitive pencil market. Her output per day and her total costs are shown in the following table:

If the current equilibrium price in the pencil market is $1.80, how many pencils will Frances produce, what price will she charge, and how much profit [or loss] will she make? [6 Marks]