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Analysis of price, quantity and diminishing returns .

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1. U.S cigarettes makers face enormous punitive damage penalties after losing a series of class-action lawsuits that heaped penalties amounting to several hundred billion dollars on tobacco industry. In spite of the huge penalties, The Wall Street Journal reported; "The damage (to cigarette makers) is generally under control". What action do you suppose the cigarette companies took to avoid bankruptcy? Why did this action succeed? Explain.

2.After two quarters of increasing levels of production, the CEO of Canadian Fabrication and Design was upset to learn that, during this time of expansion, productivity of the newly hired sheet metal workers declined with each new worker hired, Believing that the new workers were lazy or inefficiently supervised, the CEO instructed the shop foreman to "crack down" on the new workers to bring their productivity "cracking down" can increase worker productivity at Canadian Fabrication and Design?

3.At the management luncheon, two managers were overheard arguing about the following statement: "A manager should never hire another worker if the new person causes diminishing returns". Is this statement correct? If so, why? If not, explain why not?

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