5. Costs in the short run versus in the long run Scooter's Scooters is a large American manufacturer of electric scooters operating out of Boise. 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 = 25 1 260 330 400 2 3 Q = 50 200 240 280 Average Total Cost (Dollars per scooter) Q=75 Q = 100 160 160 200 200 160 160 Q=125 280 240 200 Q = 150 400 330 260 Suppose Scooter's Scooters is currently producing 125 scooters per month in its only factory. Its short-run average total cost is 5 Suppose Scooter's Scooters is expecting to produce 125 scooters per month for several years. In this case, in the long run, it would choose to produce scooters using per scooter.
5. Costs in the short run versus in the long run Scooter's Scooters is a large American manufacturer of electric scooters operating out of Boise. 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 = 25 1 260 330 400 2 3 Q = 50 200 240 280 Average Total Cost (Dollars per scooter) Q=75 Q = 100 160 160 200 200 160 160 Q=125 280 240 200 Q = 150 400 330 260 Suppose Scooter's Scooters is currently producing 125 scooters per month in its only factory. Its short-run average total cost is 5 Suppose Scooter's Scooters is expecting to produce 125 scooters per month for several years. In this case, in the long run, it would choose to produce scooters using per scooter.
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter4: Extent (how Much) Decisions
Section: Chapter Questions
Problem 3MC
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Transcribed Image Text: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 (SRATC1); 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 its 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.
?
AVERAGE TOTAL COST (Dollars per scooter)
400
360
320
260
240
200
160
120
60
25
50
75
100
QUANTITY (Scooters)
125
150
175
A
SRATC,
$
SRATC
SRATC
-0-
LRATO
Transcribed Image Text:5. Costs in the short run versus in the long run
Scooter's Scooters is a large American manufacturer of electric scooters operating out of Boise. 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 = 25
1
260
2
330
400
3
Q = 50
200
240
280
Average Total Cost
(Dollars per scooter)
Q = 75
Q = 100
160
200
160
160
200
160
Q = 125
280
240
200
Q = 150
400
330
260
Suppose Scooter's Scooters is currently producing 125 scooters per month in its only factory. Its short-run average total cost is 5
Suppose Scooter's Scooters is expecting to produce 125 scooters per month for several years. In this case, in the long run, it would choose to produce
scooters using
per scooter.
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