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 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.) Average Total Cost (Dollars per scooter) Number of Factories Q=50 Q = 100 Q = 150 Q = 200 Q=250 =300 140 60 40 BO 160 320 2 230 110 40 40 110 230 3 320 160 80 40 60 140 Suppose Scooter's Scooters is currently producing 300 scooters per month in its only factory. Its short-run average total cost is $320 per scooter. Suppose Scooter's Scooters is expecting to produce 300 scooters per month for several years. In this case, in the long run, it would choose to produce scooters using one factory 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 (SRATC); use the purple points (diamond symbol) to plot its SRATC curve if it operates two factories (SRATC); 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 (cincle 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 (Dolars per scooter) 320 240 200 50 100 150 200 QUANTITY (Scooters) 250 SRATC SRATC D 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. Range Fewer than 150 scooters per month More than 200 scooters per month Between 150 and 200 scooters per month Economies of Scale Constant Returns to Scale Diseconomies of Scale о 0
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 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.) Average Total Cost (Dollars per scooter) Number of Factories Q=50 Q = 100 Q = 150 Q = 200 Q=250 =300 140 60 40 BO 160 320 2 230 110 40 40 110 230 3 320 160 80 40 60 140 Suppose Scooter's Scooters is currently producing 300 scooters per month in its only factory. Its short-run average total cost is $320 per scooter. Suppose Scooter's Scooters is expecting to produce 300 scooters per month for several years. In this case, in the long run, it would choose to produce scooters using one factory 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 (SRATC); use the purple points (diamond symbol) to plot its SRATC curve if it operates two factories (SRATC); 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 (cincle 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 (Dolars per scooter) 320 240 200 50 100 150 200 QUANTITY (Scooters) 250 SRATC SRATC D 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. Range Fewer than 150 scooters per month More than 200 scooters per month Between 150 and 200 scooters per month Economies of Scale Constant Returns to Scale Diseconomies of Scale о 0
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: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 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.)
Average Total Cost
(Dollars per scooter)
Number of Factories Q=50
Q = 100
Q = 150 Q = 200
Q=250
=300
140
60
40
BO
160
320
2
230
110
40
40
110
230
3
320
160
80
40
60
140
Suppose Scooter's Scooters is currently producing 300 scooters per month in its only factory. Its short-run average total cost is
$320 per scooter.
Suppose Scooter's Scooters is expecting to produce 300 scooters per month for several years. In this case, in the long run, it would choose to produce
scooters using one factory
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 (SRATC); use the purple points (diamond symbol) to plot its SRATC curve if it operates
two factories (SRATC); 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 (cincle 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 (Dolars per scooter)
320
240
200
50
100
150
200
QUANTITY (Scooters)
250
SRATC
SRATC
D
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.
Range
Fewer than 150 scooters per month
More than 200 scooters per month
Between 150 and 200 scooters per month
Economies of Scale Constant Returns to Scale Diseconomies of Scale
о
0
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