1. The variety of Riverside Ranger logo T-shirts includes 12 different designs. Setup between designs takes one hour (and $15,000), and, after setting up, you can produce 1,000 units of a particular design per hour (at a cost of $11,000).

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=$15,000Q+$11AC=$15,000Q+$11

AC=$15,000+$11AC=$15,000+$11

AC=$15,000+$11QAC=$15,000+$11Q

AC=$15,000+$11,000AC=$15,000+$11,000

Based on this information, production in any one single design economies of scale. (A or B)

1. Exhibits
2. Not exhibits

2. Under constant returns to scale, average cost as the quantity produced increases. (a,b or c)

A. Falls

B. Remains consistent

C. rises

Over this range of output, the marginal cost curve is the average cost curve. (a,b or c)

A. equivalent to

B. higher than

C. lower than

3. Suppose that due to the outbreak of a new flu, known as H14N9, the demand for hand sanitizer has tripled.

Smith & Smith, a company that produces and sells hand sanitizer, should production of its hand sanitizer.

A.decrease

B. increase

Suppose there is no vaccine for H14N9, and that a vaccine will not be developed for several decades.

True or False: Smith & Smith should increase its productive capacity by leasing new plant and equipment.

True

False