Question

3. Costs in the short run versus in the long run Ike's Bikes is a major manufacturer of bicycles. Currently, the company produces bikes using only one factory. However, it is considering expanding production to two or even three factories. The following table shows the company's short-run average total cost (SRATC) each month for various levels of production if it uses one, two, or three factories. (Note: Q equals the total quantity of bikes produced by all factories.) Number of Factories Q = 50 180 270 360 Q = 100 100 150 200 Average Total Cost (Dollars per bike) 0 = 150 O = 200 80 120 80 80 120 80 0 = 250 200 150 100 Q = 300 360 270 180 per Suppose Ike's Bikes is currently producing 50 bikes per month in its only factory. Its short-run average total cost is $ bike. Suppose Ike's Bikes is expecting to produce 50 bikes per month for several years. In this case, in the long run, it would choose to produce bikes using On the following graph, plot the three SRATC curves for Ike's Bikes from the previous table. Specifically, use the green points (triangle symbol) to plot its SRATC curve if it operates one factory (SRATC1); use the purple points (diamond symbol) to plot its SRATC curve if it operates two factories (SRATC2); and use the orange points (square symbol) to plot its SRATC curve if it operates three factories (SRATC3). Finally, plot the long-run average total cost (LRATC) curve for Ike's Bikes using the blue points (circle symbol). عللتطحید طي طنجد حطط لححححححح السطحيمحدد حجناح احححححح محطع جعلنا لمسح طنط ندید چطع جنطینید در جای جایا

Answer 1

Blank 1: 180

Blank 2: One Factory

	Aveage total cost (Dollors per bike) at various quantity (Q)
No. Of Factories	50	100	150	200	250	300
1	180	100	80	120	200	360
2	270	150	80	80	150	270
3	360	200	120	80	100	180

400 350 Series1 300 Series2 250 Series3 200 150 100 50 0 350 0 50 100 150 200 250 300

Series 1: SRATC 1

Series 2: SRATC 2

Series 3: SRATC 3

All lowest points on the graph are LRATC points

More than 200 bikes: Diseconomies of scale

Fewer than 150: Economies of scale

Between 150 & 200: Constant returns of scale