Question

Scooter's scooters is a large American manufacturer of electric scooters operating out of Grand Rapids. 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. What is the average total cost (in dollars per scooter) for producing 200 scooters if the company operates out of two factories?

1) 540
2) 300
3) 160
4) 160
5) 300
6) 540

Answer 1

The average total cost for producing 200 scooters if the company operates out of two factories is $160.Thus option 3 is the correct answer.

Step-by-step explanation:

Scooter's scooters' short-run average total cost (SRATC) is provided for various levels of production with different numbers of factories. To determine the average total cost for producing 200 scooters with two factories, we look at the corresponding value in the table. The answer is $160.

Now, let's delve into the rationale behind this. The short-run average total cost represents the cost per unit of production, and by referring to the table for two factories at the production level of 200 scooters, we find the associated SRATC of $160. This implies that if Scooter's scooters opts for the two-factory configuration, the cost to produce each scooter when manufacturing 200 units will average out to $160.

In summary, the decision to operate with two factories at the specified production level is economically advantageous, with an average cost of $160 per scooter. This information is crucial for management in making informed choices about expanding operations and optimizing production costs for the company's electric scooters.The average total cost for producing 200 scooters if the company operates out of two factories is $160.Thus option 3 is the correct answer.