AVERAGE TOTAL COST (Dollars per scooter)8007206405604804003202401608000100200400QUANTITY (Scooters)300RangeBetween 300 and 400 scootersper monthFewer than 300 scooters permonth500More than 400 scooters permonth600700SRATCSRATCOSRATCO-LRATCEconomies ofScale1In 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.Constant Returns toScale23(?)ODiseconomies ofScaleо Scooter's Scooters is a large American manufacturer of electric scooters operating out of Fort Collins.Currently, the company produces all of its scooters using a single manufacturing facility, its factory intown. Recently, management has been considering expanding operations to one or two additionalfactories. 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 totalquantity of scooters produced by all factories.)Average Total Cost(Dollars per scooter)Number of Factories Q = 100 Q = 200 Q = 300 Q = 400 Q = 500 Q = 60044028024032048080062038024024038062080048032024028044012323Suppose Scooter's Scooters is currently producing 600 scooters per month in its only factory. Its short-runaverage total cost is $per scooter.Suppose Scooter's Scooters is expecting to produce 600 scooters per month for several years. In thiscase, in the long run, it would choose to produce scooters usingOn 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 threefactories (SRATC3). Finally, plot the long-run average total cost (LRATC) curve for Scooter's Scootersusing the blue points (circle symboNote: Plot your points in the order in which you would like them connected. Line segments will connectthe points automatically.

Economies of scale is when the increase in production decreases the ATC. Diseconomies of scale is…

Suppose Scooter's Scooters is currently producing 600 scooters per month in its only factory. Its short-run average total cost is $ 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

Suppose Scooter's Scooters is currently producing 600 scooters per month in its only factory. Its short-run average total cost is $ 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

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Isocost and Isoprofit Curve Analysis

An isocost curve in the production theory that is a crucial part of economics depicts different combinations of factor inputs at a given market cost. In other words, this shows all the combinations of production factors that cost the same for the firm to employ. Usually, this can be depicted as a downward sloping straight line when the firms act as the price-takers in the factor markets. The slope of this mainly depicts the relative prices of different production factors.

Question

AVERAGE TOTAL COST (Dollars per scooter)
800
720
640
560
480
400
320
240
160
80
0
0
100
200
400
QUANTITY (Scooters)
300
Range
Between 300 and 400 scooters
per month
Fewer than 300 scooters per
month
500
More than 400 scooters per
month
600
700
SRATC
SRATC
O
SRATC
O-
LRATC
Economies of
Scale
1
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.
Constant Returns to
Scale
2
3
(?)
O
Diseconomies of
Scale
о

Scooter's Scooters is a large American manufacturer of electric scooters operating out of Fort Collins.
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.)
Average Total Cost
(Dollars per scooter)
Number of Factories Q = 100 Q = 200 Q = 300 Q = 400 Q = 500 Q = 600
440
280
240
320
480
800
620
380
240
240
380
620
800
480
320
240
280
440
123
2
3
Suppose Scooter's Scooters is currently producing 600 scooters per month in its only factory. Its short-run
average total cost is $
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 symbo
Note: Plot your points in the order in which you would like them connected. Line segments will connect
the points automatically.

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