1. The demand curves of illegal drugs should be price inelastic for the people that are addicted to these drugs. To reduce the total revenue of drug dealers, should we focus on reducing the supply (curve) of illegal drugs or reducing the demand (curve) of illegal drug? Explain your answer. (2 points)

2. Suppose for a firm, the long run total cost TC = $1,000 when the output level Q = 20. The long run total cost increases to TC = $1,200 when the output level Q = 30. What does this exhibit, economics of scale, diseconomies of scale, or economies of scope? Explain your answer. (1 point)

3. Suppose you have a production technology that can be characterized by a learning curve. Every time you increase production by one unit, your marginal cost (MC) will decrease by $4. The first unit costs you $64 to produce, i.e., total cost TC = $64.

If you receive a request for proposal (RFP) on a project for four units, what is your break-even price? (1 point) (You must show your calculation.)