Scooter's Scooters is a large American manufacturer of electric scooters operating out of Mesa. 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 Suppose Scooter's Scooters is currently producing 600 scooters per month in its only factory. Its short-run average total cost is $ TOTAL COST (Dollars per scooter) Suppose Scooter's Scooters is expecting to produce 600 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 (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 (SRATC3). 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. 800 720 640 560 Average Total Cost (Dollars per scooter) Q = 300 Q = 400 Q = 500 160 240 400 160 160 300 240 160 200 480 400 320 240 Q = 600 720 540 360 SRATC₁ SRATC₂2 SRATC per scooter. (?)
Scooter's Scooters is a large American manufacturer of electric scooters operating out of Mesa. 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 Suppose Scooter's Scooters is currently producing 600 scooters per month in its only factory. Its short-run average total cost is $ TOTAL COST (Dollars per scooter) Suppose Scooter's Scooters is expecting to produce 600 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 (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 (SRATC3). 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. 800 720 640 560 Average Total Cost (Dollars per scooter) Q = 300 Q = 400 Q = 500 160 240 400 160 160 300 240 160 200 480 400 320 240 Q = 600 720 540 360 SRATC₁ SRATC₂2 SRATC per scooter. (?)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Scooter's Scooters is a large American manufacturer of electric scooters operating out of Mesa. 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
300
3
400
AVERAGE TOTAL COST (Dollars per scooter)
Suppose Scooter's Scooters is currently producing 600 scooters per month in its only factory. Its short-run average total cost is $
800
Suppose Scooter's Scooters is expecting to produce 600 scooters per month for several years. In this case, in the long run, it would choose to produce
scooters using
720
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 (SRATC3). 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.
640
560
480
400
320
240
160
80
540
720
0
0
100
200
400
300
QUANTITY (Scooters)
Average Total Cost
(Dollars per scooter)
Q = 300
Q = 400
160
240
160
160
240
160
Range
More than 400 scooters per month
Q = 500
400
300
200
500
Between 300 and 400 scooters per month
Fewer than 300 scooters per month
600
700
SRATC₁
SRATC₂2
Q = 600
720
540
360
SRATC3
LRATC
(?)
In the following table, indicate whether the long-run average cost curve exhibits economies of scale, constant returns to scale, or diseconomies of
cralo for each range of conter production.
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.
per scooter.
Economies of Scale Constant Returns to Scale Diseconomies of Scale
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