1.A : Economies of Scale Consider the following table of long-run total costs for three different firms: Quantity 1 2 3 4 5 6 7 Firm A 25 30 40 60 90 120 150 Firm B 70 75 80 85 90 95 100 Firm C 15 40 65 90 115 140 170 Indicate whether each firm experiences economies of scale or diseconomies of scale. (Note: If a firm experiences economies of scale in one region and diseconomies of scale in another, make sure to select both columns.) Firm Economies of Scale Diseconomies of Scale A B C 01. B . Definition of economic costs Jacques lives in San Francisco and operates a small company selling drones. On average, he receives $833,000 per year from selling drones. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $464,000. He also pays several utility companies, as well as his employees wages totaling $278,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $68,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Jacques does not operate the drone business, he can work as a programmer and earn a yearly salary of $34,000 with no additional monetary costs, and rent out his storefront at the $68,000 per year rate. There are no other costs faced by Jacques in running this drone company. Identify each of Jacques's costs in the following table as either an implicit cost or an explicit cost of selling drones. Implicit Cost Explicit Cost The wages that Jacques pays O The salary Jacques could earn if he worked as a programmer O O The rental income Jacques could receive if he chose to rent out his showroom O O The wholesale cost for the drones that Jacques pays the manufacturer O O Complete the following table by determining Jacques's accounting and economic profit of his drone business. Profit (Dollars) Accounting Profit Economic Profit -1.C : . 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.) Average Total Cost (Dollars per scooter) Number of Factories Q = 100 Q = 200 Q = 300 Q = 400 Q = 500 Q = 600 1 440 280 240 320 480 800 620 380 240 240 380 620 N 800 480 320 240 280 440 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 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 (SRATCy); use the purple points (diamond symbol) to plot its SRATC curve if it operates two factories (SRATCo); 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. 800 A 720 SRATO 560 SRATO2 AVERAGE TOTAL COST (Dollars per scooter) -O SRATO, O LRATC g 0 0 100 200 300 400 500 800 700 QUANTITY (Scooters) 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 Economies of Scale Constant Returns to Scale Diseconomies of Scale More than 400 scooters per month O O O Between 300 and 400 scooters per month O O O Fewer than 300 scooters per month O O O