Problem 3: (20 Points) The economist for the Northern Truck Manufacturing Corporation has calculated a production function for the manufacture of their medium-size trucks as follows: Q = 132"-75K"-3. where Q is the number of trucks producer per week, L is the number of labor hours per day, and K is the daily usage of capital investment. A. Does the equation exhibit increasing, constant, or decreasing retums to scale? Why? (2) B. How many trucks will be produced per week with the following amounts of labor and capital? (4) Labor Capital 100 50 120 60 150 75 200 100 300 150 C. If capital and labor are both increased by 10%, what will be the percentage increase in the quantity of trucks produced? (3) D. Assume only labor increases by 10%. What will be the percentage increase in the production of trucks? What does this result imply about the marginal product of labor? (3) E. Assume only capital increases by 10%. What will be the percentage increase in production? (3) F. How would your answers change if the production function was Q = 1310-7103. What are the implications of this production function? (5) Problem 4: (14 points) Indicate whether each of the following statements is true or false. Explain why. A. When the law of diminishing returns takes effect, a firm's average product will start to decrease. (2) B. A decision maker must always use the historical cost of raw materials in making an economic decision. (2) C. Decreasing returns to scale occurs when a firm has to increase all its inputs at an increasing rate to maintain a constant rate of increase in its output. (2) D. A linear short-run production function implies that the law of diminishing