5. The table below shows how the average costs of production for microchips change as the quantity of microchips built at a factory in South Korea increases.

Quantity of microchips

Average Total Cost

10,000

$4 each

20,000

$2.5 each

30,000

$1.5 each

40,000

$1 each

100,000

$1 each

a. Based on these data, draw a curve with quantity produced on the horizontal axis and average cost of production on the vertical axis. How does the curve illustrate economies of scale?

b. If the equilibrium quantity of microchips demanded is 90,000, can this economy take full advantage of economies of scale? What about if quantity demanded is 50,000 microchips? 30,000 microchips?

c. Explain how international trade could make it possible for even a small economy to take full advantage of economies of scale, while also benefiting from competition and the variety offered by several producers.