What does this graph tell us about the nature of economies of scale in the beer brewing industry?

Chapter 6, Technical Question 3 in the textbook.

Chapter 6, Application Question 3 in the textbook.

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3. Industry studies often suggest that firms may have long-run average cost curves that show some output range over which there are economies of scale and a wide range of output over which long-run average cost is constant; finally, at very high output, there are diseconomies of scale.

a. Draw a representative long-run average cost curve, and indicate the minimum efficient scale.

b. Would you expect that firms in an industry like this would all produce about the same level of output? Why?

3. The following graph shows economies of scale in the beer brewing industry.

Please see attached document for graph. Replicate the graph on EXCEL then answer the questions

a. What does this graph tell us about the nature of economies of scale in the beer brewing

industry?

b. What are the particular problems associated with the firm represented by the SATC curve

shown in the graph? Does it represent a firm that would be able to survive over time?

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