QUESTION 2: Table 1: Demand schedule for Rare Stones Price (dollars per stone) Quantity demanded (millions of stones per year) 200 50 250 45 300 40 350 35 400 30 Part 1: The Rare Stone market is competitive and its demand schedule in shown in Table 1. Use the demand schedule to answer parts (a) and (b) below. a. What happens to total revenue if the price falls from $400 to $350 a stone and from $350 to $300 a stone? b. At an average price of $300, is the demand for stones elastic, inelastic, or unit elastic? Explain your answer using the total revenue test. PART II Three new firms have entered the Rare Stone market. Their long-run total cost data are shown in Table 2. Table 2: Long-run ATC QUATITY OF RARE STONES (MILLIONS) 1 2 3 6 7 FIRM X $60.00 $70.00 $80.00 $90.00 $100.00 $110.00 $120.00 FIRM Y $11.00 $24.00 $39.00 $56.00 $75.00 $96.00 $119.00 FIRM Z $21.00 $34.00 $49.00 $66.00 $85.00 $106.00 $129.00 c. Determine whether each firm is experiencing economies of scale or diseconomies of scale. Explain your answer in detail