QUESTION 2: 35 marks. Word Limit: 400 Words. Table 1: Demand schedule for Rare Stones Price [dollars per stone) Quantity demanded [millions of stones per year] 200 50 250 45 300 40 350 35 400 30 Part I: The Rare Stone market is competitive and its demand schedule in shown in Table 1. Use the demand schedule to answer parts {a} and lb} below. a. What happens to total revenue if the price falls from $400 to $350 a stone and from $350 to $300 a stone? [10 marks] b. At an average price of $300, is the demand for stones elastic, inelastic, or unit elastic? Explain your answer using the total revenue test.[5 marks] PART II Three new firms have entered the Rare Stone market. Their long-run total cost data are shown in Table 2. Table 2: Long-run ATC lI'LLUJIEKTITY OF RARE STONES {MILLIONS} 3 d 5 6 $80.00 $90.00 $100 .00 51 10.00 $39.00 $56.00 $75.00 $96.00 $49.00 $66.00 $85.00 51 06.00 c. Determine whether each firm is experiencing economies of scale or diseconomies of scale. Explain your answer in detail. [20 marks]