(a) You have been appointed as the manager of a biscuit manufacturing enterprise. Prior to your arrival, you read the handover report of your predecessor. In this note, it was reported that the previous manager employed 100 new factory workers, and this greatly improved biscuit output. However, after employing 50 more workers, there was no further increase in production. In fact, it had begun to decline. These were the circumstances around the firing of the previous manager, that led to you being hired. Using your knowledge of economics, write a report to the board explaining what could have gone wrong in detail. Also, what specific action steps do you intend to take to make the company productive again?

(b) There are two firms in an industry, Pym and Rand. Each firm faces high but declining average costs as it increases production. The firms engage in cost cutting until Rand manages to capture the market and Pym is forced to leave. Examine the nature of this industry. What if the government were to intervene in this industry? Discuss.