1. Economies of scaleWeb Slinger is an Internet service provider. In the long run, Web Slinger can provide Internet service for 20,000 homes each month at a total cost of$600,000, Internet service for 30,000 homes at a total cost of $750,000, or Internet service for 40,000 homes at a total cost of $800,000.Use the purple points (diamond symbol) on this graph to plot points of the long-run average cost curve at outputs of 20,000, 30,000, and 40,000homes.(?50Average cost403020101020304050HOMES SERVED (Thousands)AVERAGE COST (Dollars per home per month) Suppose that there are 40,000 households that purchase Internet service in this area. All of Web Slinger's potential rivals face the same long-runaverage cost curve.True or False: Because Web Slinger faces falling long-run average cost over the relevant output range, it would be inefficient for another firm to enterthis Internet service market.FalseTrue

Answer: To derive the long-run average cost curve, we need average cost. The average cost schedule…

1. Economies of scale Web Slinger is an Internet service provider. In the long run, Web Slinger can provide Internet service for 20,000 homes each month at a total cost of $600,000, Internet service for 30,000 homes at a total cost of $750,000, or Internet service for 40,000 homes at a total cost of $800,000. Use the purple points (diamond symbol) on this graph to plot points of the long-run average cost curve at outputs of 20,000, 30,000, and 40,000 homes. 50 Average cost 40 30 10 10 20 30 40 50 HOMES SERVED (Thousands) AVERAGE COST (Dollars per home per month)