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suppose you have a production technology that can be characterized by a learning curve
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 $76 to produce.
Use the given information to fill in the marginal cost of each unit, as well as the total cost and average cost of each level of output.
Quantity
Marginal Cost
Total Cost
Average Cost
(Units)
($)
($)
($/unit)
1$76$76$7623456
Suppose you receive a request for proposal (RFP) on a project for three units.
Your break-even price for three 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
Expert Solution
| Q | MC | TC | AC(TC/Q) |
| 1 | 76 | 76 | 76 |
| 2 | 72 | 148 | 74 |
| 3 | 68 | 216 | 72 |
| 4 | 64 | 280 | 70 |
| 5 | 60 | 340 | 68 |
| 6 | 56 | 396 | 66 |
The break even point is the point where total revenue is equal to total cost or price is equal to average cost. At breakeven point, the firm earns zero economic profit.
Break-even price for three units = $216 / 3 = $72
Break-even price for those next two units (i.e., 3rd and 4th units) alone = (64+60) / 2 = $62
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