The late columnist william f. buckley, commenting on a strike by the teamsters union against ups in 1997, offered this bit of economic analysis to explain how ups had succeeded in reducing its average total cost: "ups had done this by economies of scale. up to a point (where the marginal cost equals the price of the marginal unit), the larger the business, the less the per-unit cost." use the concept of economies of scale, together with the information presented in this chapter, to explain the error in mr. buckley’s statement.

Jaguar has full manufacturing costs of their s-type sedan of £22,803. they sell the s-type in the uk with a 20% margin for a price of £27,363. today these cars are available in the us for $55,000 which is the uk price multiplied by the current exchange rate of $2.01/£. jaguar has committed to keeping the us price at $55,000 for the next six months. if the uk pound appreciates against the usd to an exchange rate of $2.15/£, and jaguar has not hedged against currency changes, what is the amount the company will receive in pounds at the new exchange rate?