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.) Number of Factories AVERAGE TOTAL COST (Dollars per scooter) 2 3 640 Q = 100 Q = 200 360 200 540 720 480 300 400 Suppose Scooter's Scooters is currently producing 600 scooters per month in its only factory. Its short-run average total cost is 5 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 Average Total Cost (Dollars per scooter) Q = 300 Q = 400 Q = 500 160 240 400 160 300 160 200 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 (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. 300 400 QUANTITY (Scooters) 160 240 Range Between 300 and 400 scooters per month More than 400 scooters per month Fewer than 300 scooters per month SRATC, SRATC Q = 600 720 540 360 SRATC LRATC per scooter. 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

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.) Number of Factories AVERAGE TOTAL COST (Dollars per scooter) 2 3 640 Q = 100 Q = 200 360 200 540 720 480 300 400 Suppose Scooter's Scooters is currently producing 600 scooters per month in its only factory. Its short-run average total cost is 5 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 Average Total Cost (Dollars per scooter) Q = 300 Q = 400 Q = 500 160 240 400 160 300 160 200 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 (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. 300 400 QUANTITY (Scooters) 160 240 Range Between 300 and 400 scooters per month More than 400 scooters per month Fewer than 300 scooters per month SRATC, SRATC Q = 600 720 540 360 SRATC LRATC per scooter. 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

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

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Question

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 totall 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
720
400
AVERAGE TOTAL COST (Dollars per scooter)
800
Suppose Scooter's Scooters is currently producing 600 scooters per month in its only factory. Its short-run average total cost is $
560
480
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
400
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 (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.
240
160
N m
80
3
0
D
100
200
300
400
QUANTITY (Scooters)
Average Total Cost
(Dollars per scooter)
Q = 300 Q = 400
160
240
160
160
240
160
500
Range
Between 300 and 400 scooters per month
More than 400 scooters per month
Fewer than 300 scooters per month
600
700
Q = 500
400
300
200
SRATC,
SRATC
-0-
SRATC
Q = 600
720
540
360
O
LRATC
per scooter.
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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