$ mill. per lm 1. External Economies of Scale Suppose that there are external economies of Scale in the production of motion pictures (films), so that fi lm production is subject to a forward-falling supply curve (downward-sloping industry average cost curve). The graph below shows the industry average cost curves in two countries. Suppose also that the world film industry originated in country A, where all 250 films per year are currently produced. However, as indicated by the graph, the cost of film production is potentially lower in country B due to 3'5 greater relative endowment of natural artistic talent. $14 $13 $12 $11 $10 Q (industry # lms per year) 050100150200250300350400 a. Briefly describe (first) two reasons why the film industry might face a downward sloping average cost b. curve. What prevents individual film producers in Country B from entering the world market, even though the current level of world output could be produced more efficiently if all production was relocated to Country B? Suppose that Country B's government wants to develop a domestic film industry by temporarily banning imports of Country A's films. What is the minimum domestic market size (i .e. minimum domestic demand at the current world price) that would be necessary for this policy to foster a globally competitive film industry in Country B (i.e. one that would be more efficient than Country A's)? Brief/y exp/am how temporary protection of B's market (eg. by temporarily banning imports) might improve welfare in both Country B and the world as a whole