Suppose you have a production technology that can be characterized by a learning curve. Every time you increase production by one unit, your costs decrease by $6. The first unit costs you $64 to produce.
a) If you receive a request for proposal (RFP) on a project for four units, what is your break-even price?
b) Suppose that if you get the contract, you estimate that you can win another project for two more units. Now what is your break-even price for those two units?
Managerial Economics: A Problem Solving Approach
Authors: Luke M. Froeb and Brian T. McCann
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