How does the film industry help the local, state, national, and international economy?

On Sunday, March 4th, the Academy of Motion Picture Arts and Sciences will host the 90th Academy Awards ceremony.

In addition to the event’s glamour and celebrity, the Academy Award season is an opportune time to consider something else about the film/video industry—its value to the U.S. economy, and to a few states in particular.

According to the latest figures from the Arts and Cultural Production Satellite Account (ACPSA), which is produced jointly by the U.S. Bureau of Economic Analysis and the National Endowment for the Arts, the film and video industry contributed $100 billion to U.S. GDP in 2015, and it employed 390,000 workers. Although the U.S. consistently runs trade deficits, movies/TV shows generate trade surpluses—$11.9 billion in 2015. The full figures for all ACPSA industries will be released this Tuesday, March 6th.

The 2015 figures also reveal a number of interesting facts about the film and video industry (i.e., business establishments that produce and distribute movies and TV shows; movie theaters, cinemas, and film festivals; and companies that provide post-production services such as film restoration):

1) The industry is huge. Film/video production is the third-largest of all ACPSA industries—in 2015, it accounted for 13 percent of all value added by U.S. arts and culture to GDP, ranking just behind arts-related broadcasting and government-produced arts and cultural commodities. The film industry places fourth in ACPSA employment, following arts-related broadcasting, government arts/culture, and the arts retail trade industry.

2) Film/video production is concentrated in California and New York, but also in Louisiana—the only state that approaches the other two by this measure.

The March 2018 release of the ACPSA is the first to include “value-added” figures by industry for each state and the District of Columbia. In California, the film and video industry contributed $49.1 billion to the state’s economy in 2015; in New York, it contributed $28.2 billion.

Value added to Louisiana by the state’s film/video industry was $2.7 billion. At first glance, the figure appears relatively small. As a share of the state’s overall economy, however, it is twice the national average.

Only California and New York show film and video production occupying a larger share of gross state product: in each state, the industry’s value-added is 3.5 times greater than the national index.

3) Six states have witnessed double-digit growth in film and video production. Between 2012 and 2015, value added (unadjusted for inflation) by the film and video industry grew by more than 11 percent in six states: South Carolina (20.1 percent); Connecticut (16.2 percent); Georgia (15.3 percent); Mississippi (13.6 percent); Rhode Island (12.7 percent); and Louisiana (11.7 percent).

4) The U.S. regularly generates a trade surplus in movies and TV shows. This trade surplus, which reached $11.9 billion in 2015, has doubled since 1998. Leading importers of U.S. movies and TV shows are the U.K, Germany, and Canada. In 2015, those three countries, combined, imported nearly $6.9 billion, or 39 percent of all U.S. movie/TV show exports.

Chart showing growth in US movies and TV shows between 1998 and 2015

5) Growth of the web-streaming industry is far outpacing that of the film/video industry. Between 2012 and 2015, average annual growth in real value added by the traditional film/video industry was just 0.2 percent, well below the 2.6 percent growth rate in real value added by all ACPSA industries.

A clue to this slow growth may lie in “other information services,” an industry that consists mainly of web-streaming, web-publishing, and similar services.

Over the three-year period, real value added by other information services grew by an average annual rate of 21 percent—the strongest growth rate, by far, of all ACPSA industries. The popularity of web-streaming services for TV and movies (both in the production and consumption of content) may be eroding the industry’s contribution to GDP.

The traditional broadcasting industry, like film companies, also produces movies and TV shows. In 2015, the film and video industry produced $79.5 billion in gross output of movies and TV programs. The broadcasting industry produced $429 million.

Of the ACPSA’s 35 industries, broadcasting (inclusive of TV and cable networks) generates the greatest value-added. In 2015, broadcasters (excluding sports broadcasts), added $127.8 billion to the U.S. economy. Between 2012 and 2015, average annual growth in arts-related value added by the industry was 2.6 percent, a rate on par with that of total arts and cultural value-added.

Im not 100% sure if this will help but hope it does!

marginal cost is a microeconomic measure that us to evaluate the extent to which the level of production of a good is sustainable in accounting, that is, to how many quantities the company plans to profit from the production of the good.

the concept of marginal cost is simple, it means the cost of producing one more item. for example, in the case of pies, the marginal cost is the cost of producing one more pie than those that have already been produced.

it is important to understand that productive activity influences marginal cost. the marginal cost of some goods can be very high, while others may be insignificant. for example, the marginal cost of producing an extra plane is very high. already the marginal cost of a water company to provide 1l more water is derisory.

in the case of pies, the cost involves the inputs, the labor and the fixed cost, which involves the fixed space of the bakery. the level of production initially has the marginal cost decreasing because there is space and manpower available. however, to produce more you have to hire more workers and buy more inputs. if physical space is limited, workers will conflict with places, inputs and their productivity will decrease, meaning there is an optimum point of production for each level of space and manpower. from this point on, the productivity of the workers will be getting smaller because of lack of space, so that the marginal cost of producing one more pie will be increasing. so, although you have not posted the chart, but if you have the answer, you can see that my explanation goes according to the marginal cost curve that will increase from the 4th pie, answer (c).