Question

Tables 1—3 shows the production costs of the Deering Manufacturing Company. Use the data and answer questions 5-7.

Table 1.

Output	Fixed Cost	Variable Cost	Total Cost	Average Cost
1	25	7	32
2	25	18	43
3	25	33	58
4	25	52	77

Table 2.

Output	Fixed Cost	Variable Cost	Total Cost	Average Cost
5	30	75	105
6	30	102	132
7	30	133	163
8	30	168	198

Table 3.

Output	Fixed Cost	Variable Cost	Total Cost	Average Cost
9	45	207	252
10	45	250	295
11	45	297	342
12	45	348	393

1. Draw the short-run average cost curve for the data in Table 1.
2. Draw the long-run average cost curve for the data on Tables 1—3.   
3. Highlight the output range where the production shows the economies of scale.

Answer 1

Output	Fixed Cost	Variable Cost	Total Cost	Average Cost
1	25	7	32	32.00
2	25	18	43	21.50
3	25	33	58	19.33
4	25	52	77	19.25

Output	Fixed Cost	Variable Cost	Total Cost	Average Cost
5	30	75	105	21.00
6	30	102	132	22.00
7	30	133	163	23.29
8	30	168	198	24.75

Output	Fixed Cost	Variable Cost	Total Cost	Average Cost
9	45	207	252	28.00
10	45	250	295	29.50
11	45	297	342	31.09
12	45	348	393	32.75

Economies of scale occurs when long run average total cost curve falls when output level rises which occurs till output level of 4.