1. You sell 2 products. Product one has sales of $50,000 on volume of 1,000. Each unit needs 10.3 minutes to inspect. Costs are $23132 variable and $10768 fixed.

Product 2has sales of $150,000 on volume of 2,000. Each unit needs 13.8 minutes to inspect. Costs are $55996 variable and $36268 fixed.

Assume that inspection time is scarce. Calculate the total shadow cost of inspection time in $ / hour (round to the dollar)

2.Notwithstanding your answer to the last question, assume the shadow cost is $150/hour. You are considering adding a third product. The third product would sell for $86 per unit. Variable cost to produce it would be $28 per unit and fixed costs would be $18044. Inspection time for the product would be 14.7 minutes per unit. Calculate the breakeven volume for this new product, taking opportunity cost into account

3.This situation is an example of which type of product interaction?

a.

Demand substitution

b.

Supply complement

c.

Supply substitution

d.

Demand complement