1.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 decreases by $4. There are no fixed costs, and the first unit costs you $66 to produce.

Use the given information to fill in the marginal cost of each unit, as well as the total cost and average cost of each level of output.

Quantity Marginal Cost Total Cost Average Cost

(Units) ($) ($) ($/unit)

1 $66 $66 $66

2

3

4

5

6

Suppose you receive a request for proposal (RFP) on a project for two units.

Your break-even price for two units is ????

Suppose that if you get the contract, you estimate that you can win another project for two more units.

The break-even price for those next two units alone is???

2. The variety of Riverside Ranger logo T-shirts includes 12 different designs. Setup between designs takes one hour (and $20,000), and, after setting up, you can produce 1,000 units of a particular design per hour (at a cost of $5,000).

Note: AssumeQQdenotes the quantity produced of a particular design.

Which of the following best represents the average cost function for producing any single design?

AC=$20,000+$5AC=$20,000+$5

AC=$20,000Q+$5AC=$20,000Q+$5

AC=$20,000+$5,000AC=$20,000+$5,000

AC=$20,000+$5QAC=$20,000+$5Q

Based on this information, production in any one single design (Exhibits or does not exhibit???)economies of scale.