3. Costs in the short run versus in the long run Scooter's Scooters is a large American manufacturer of electric scooters operating out of Detroit. Currently, the company produces all of its scooters using a single manufacturing facility, its factory in town. Recently, management has been considering expanding operations to one or two additional factories. The following table presents the manufacturer's monthly short-run average total cost (SRATC) for various levels of production if it operates out of one, two, or three factories. (Note: Q equals the total quantity of scooters produced by all factories.) Number of Factories Q 100 1 3 360 540 720 Q-200 200 300 400 Average Total Cost (Dollars per scooter) Q=300 Q 400 Q500 160 400 160 300 240 200 240 160 160 0-600 720 540 360 Suppose Scooter's Scooters is currently producing 100 scooters per month in its only factory. Its short-run average total cost is per scooter Suppose Scooter's Scooters is expecting to produce 100 scooters per month for several years. In this case, in the long run, it would choose to produce scooters using On the following graph, plot the three SRATC curves for Scooter's Scooters from the previous table. Specifically, use the green points (triangle symbol) to plot its SRATC curve if it operates one factory (SRATO; use the purple points (diamond symbol) to plot its SRATC curve if it operates two factories (SRATC₂); and use the orange points (square symbol) to plot s SRATC curve if it operates three factories (SRATC). Finally, plot the long-run average total cost (LRATC) curve for Scooter's Scooters using the blue points (circle symbol). Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.
3. Costs in the short run versus in the long run Scooter's Scooters is a large American manufacturer of electric scooters operating out of Detroit. Currently, the company produces all of its scooters using a single manufacturing facility, its factory in town. Recently, management has been considering expanding operations to one or two additional factories. The following table presents the manufacturer's monthly short-run average total cost (SRATC) for various levels of production if it operates out of one, two, or three factories. (Note: Q equals the total quantity of scooters produced by all factories.) Number of Factories Q 100 1 3 360 540 720 Q-200 200 300 400 Average Total Cost (Dollars per scooter) Q=300 Q 400 Q500 160 400 160 300 240 200 240 160 160 0-600 720 540 360 Suppose Scooter's Scooters is currently producing 100 scooters per month in its only factory. Its short-run average total cost is per scooter Suppose Scooter's Scooters is expecting to produce 100 scooters per month for several years. In this case, in the long run, it would choose to produce scooters using On the following graph, plot the three SRATC curves for Scooter's Scooters from the previous table. Specifically, use the green points (triangle symbol) to plot its SRATC curve if it operates one factory (SRATO; use the purple points (diamond symbol) to plot its SRATC curve if it operates two factories (SRATC₂); and use the orange points (square symbol) to plot s SRATC curve if it operates three factories (SRATC). Finally, plot the long-run average total cost (LRATC) curve for Scooter's Scooters using the blue points (circle symbol). Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:3. Costs in the short run versus in the long run
Scooter's Scooters is a large American manufacturer of electric scooters operating out of Detroit. Currently, the company produces all of its scooters
using a single manufacturing facility, its factory in town. Recently, management has been considering expanding operations to one or two additional
factories. The following table presents the manufacturer's monthly short-run average total cost (SRATC) for various levels of production if it operates
out of one, two, or three factories. (Note: Q equals the total quantity of scooters produced by all factories.)
Number of Factories Q-100 Q-200
1
360
200
2
540
300
3
720
400
Average Total Cost
(Dollars per scooter)
Q=300 Q 400 9 500
160
240
400
160
160
300
240
200
160
0600
720
540
360
Suppose Scooter's Scooters is currently producing 100 scooters per month in its only factory. Its short-run average total cost is
per scooter
Suppose Scooter's Scooters is expecting to produce 100 scooters per month for several years. In this case, in the long run, it would choose to produce
scooters using
On the following graph, plot the three SRATC curves for Scooter's Scooters from the previous table. Specifically, use the green points (triangle
symbol) to plot its SRATC curve if it operates one factory (SRATO; use the purple points (diamond symbol) to plot its SRATC curve if it operates
two factories (SRATC₂); and use the orange points (square symbol) to plotits SRATC curve if it operates three factories (SRATC₂). Finally, plot the
long-run average total cost (LRATC) curve for Scooter's Scooters using the blue points (circle symbol).
Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.
Transcribed Image Text:symbol) to plot its SRATC curve if it operates one factory (SRATC); use the purple points (diamond symbol) to plot its SRATC curve if it operates
two factories (SRATC's); and use the orange points (square symbol) to plot its SRATC curve if it operates three factories (SRATC₂). Finally, plot the
long-run average total cost (LRATC) curve for Scooter's Scooters using the blue points (circle symbol).
Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.
AVERAGE TOTAL COST (Dollars per scooter)
800
720
640
500
400
400
320
240
100
DO
o
100
200
300
400
QUANTITY (Scooters)
500
Range
More than 400 scooters per month
Between 300 and 400 scooters per month
Fewer than 300 scooters per month
000
700
A
SRATC
SRATC
-
SRATC
LRATC
In the following table, indicate whether the long-run average cost curve exhibits economies of scale, constant returns to scale, or diseconomies of
scale for each range of scooter production.
Economies of Scale Constant Returns to Scale Diseconomies of Scale
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