Question

5. Costs in the short run versus in the long run Ike's Bikes is a major manufacturer of 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.) Currently, the company produces bikes using only one factory. However, it is (Dollars per bike) Number of Factories 75 130 165 200 150 100 120 140 225 Q 300 375 Q-450 140 120 100 100 165 100 130 per bike. Suppose Ike's Bikes is currently producing 375 bikes per month Suppose Ike's Bikes is expecting to produce 375 bikes per month for several years, In this case, in the long run, t 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 (SRATC ); use the purple points (dliamond symbol) to plot its SRATC curve if it operates two factories ( SRATC2)i and use the orange points (square symbol) to plot its SRATC curve if It operates three factories (SRATCs ). Finally, plot the long-run average total cost (LRATC) curve for Ike's Bikes Note: Plot your points in the order in which you would like them

Answer 1

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