A restaurant with an initial seating capacity of thirty originally employed one chef, one manager, one person to wash up and three waiters. With this staff the restaurant could serve 14 people in an hour. When it took on an extra waiter the number of people served per hour rose to 20 people. The employment of a further waiter increased the number of people served to 28.

As the restaurant continued to be successful and customers had to be turned away, a decision was made to extend the restaurant to a seating capacity of 60 and to double the staff from the original position. The number of customers served per hour increased to 70 and reduced the cost per meal served. The success of the restaurant enabled the owner to charge a higher price per meal.

1. What is the marginal product of the fourth waiter? 3 marks

1. What are the fixed factors of production employed by the restaurant in the short run?

4 marks

1. When the restaurant employs the fifth waiter is it experiencing diminishing returns, increasing returns, decreasing returns to scale or increasing returns to scale? 5 marks
2. When the restaurant is increased in size is it experiencing diminishing returns, increasing returns, decreasing returns to scale or increasing returns to scale? Explain your answer 5 marks

As a result of expanding the size of the restaurant what is likely to have happened to the firm's

1. Average cost of production 3 marks
2. Total cost of production 2 marks
3. Total profit 3 marks