1. When one additional unit is produced, two factors directly impact the change in average total costs, the spreading effect, and the diminishing returns effect. In the following two situations, identify which effect is occurring, the spreading effect or the diminishing returns effect, and explain why.

a. Production of the 10th gizmo resulted in an average total cost (ATC) of $20, but production of the 11th gizmo resulted in an average total cost of $22.

(Enter your response here.)

b. Production of the 10th gizmo resulted in an average total cost (ATC) of $20, but production of the 11th gizmo resulted in an average total cost of $18.

(Enter your response here.)