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3. (15) Read the following article then answer the questions that follow: https://news.crunchbase.com/news/the-revenue-costs-and-margins-
behind-birds-scooters/

3a. (2) The article states that Bird generated $3.65 per ride. This is 
1. Total revenue

2. Marginal revenue

3. Average revenue

4. Pro�t margin

b. (4) Categorize the following costs as �xed, variable, or opportunity costs. 

Charging costs: 
Repair costs: 
Regulatory costs:  
Customer support sta� costs: 
Pro�t that could be made if Bird invested in pedal bikes: 
Credit card processing costs:  
O�ce space sta�:  
Engineers:  

c. (3) Bird has lost tens of millions of dollars and has never turned a pro�t since it entered the scooter rental service market. How and why does
Bird continue to operate if it has never generated a pro�t?  

d. (3) There are typically 3-4 scooter rental companies operating in the same city. Would you predict demand for one speci�c scooter company,
say Bird, is elastic or inelastic? Explain.

e.  (3) Do you think the scooter-rental industry is perfectly competitive? What characteristics are like a perfectly competitive industry? What
characteristics are unlike a perfectly competitive industry? 

Business Economics ECON 6921 섈 쉋

Answer & Explanation

Solved by veri�ed expert 숨

3a. (2) The correct answer is option (1).

b. (4) All of them are variable costs except o�ce space sta� and engineers which are �xed costs. One option is an opportunity cost.
c. (3) Revenues are enough to cover the total variable cost.
d. (3) Demand for scooters is elastic. 
e. (3) I believe that the scooter rental industry is partially perfectly competitive.

Step-by-step explanation

3a. (2) Bird generated $3.65 per ride which is the total money generated per scooter ride and is the total revenue. Therefore the correct answer is option (1).
 
b. (4) The following costs are categorized as follows:
Charging costs: Variable Cost
Repair costs: Variable Cost
Regulatory costs: Variable Cost
Customer support sta� costs: Variable Cost
The pro�t that could be made if Bird invested in pedal bikes: Opportunity Cost
Credit card processing costs: Variable Cost
O�ce space sta�: Fixed Cost
Engineers:  Fixed Cost
 

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c. (3) Bird continues to operate the business as it is able to cover its total variable costs with the revenue it generates. A �rm continues to operate as long as
it is earning enough
Question revenue
Answer to cover its total variable
& Explanation Relatedcosts. The level of production
Questions Relatedfor which a companyRelated
Textbooks experiences 숿
no incentive in resuming its operations
Courses
and therefore chooses to shut down the business is called the Shutdown point. This occurs when revenues are not able to cover the total variable cost.
Even after paying variable costs, the �rm is having a gross margin of 19%, which it can use to pay for its �xed operating costs such as o�ce space, sta�, etc
and this is how the �rm chooses to operate further even with a low gross margin (the proportion of revenue that is left over to pay for its operating costs).
 
d. (3) Demand for scooters is elastic. When the percentage change in quantity demanded for a good or service is more than the percentage change in price.,
the demand is said to be elastic. Elastic goods or services generally include those goods or services that are not consumed on a regular basis or are not used
frequently. Any increase in the price of the scooter may shift the demand drastically and people may switch to other substitutes such that the demand for
scooters decreases heavily. Therefore it can be said that the demand for the scooter is elastic.
 
e. (3) I believe that the scooter rental industry is partially perfectly competitive as it has only certain features of perfect competition. 
The characteristics of the scooter rental industry that are like a perfectly competitive industry are as follows:

• All �rms in the scooter rental industry sell homogeneous products. The features of the services o�ered are quite similar among all the �rms of the
industry.

• The supply curve of the industry is not a�ected by any individual production because all producers contribute insigni�cantly to the market and the
supply of one does not impact the supply curve of the industry.

• Firms can enter or exit the market freely.

The characteristics of the scooter rental industry that are unlike a perfectly competitive industry are as follows:

• The scooter rental industry is not composed of so many �rms. It contains few �rms only.

• Due to fewer �rms operating in the industry, �rms have little control over prices and hence are not price takers.

• There is not perfect information about the products or services being sold in the industry.

Reference
https://news.crunchbase.com/news/the-revenue-costs-and-margins-behind-birds-scooters/

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