### Understanding the Production Costs at Ike's BikesIke’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.*)#### Average Total Cost (Dollars per bike)| Number of Factories | Q = 100 | Q = 200 | Q = 300 | Q = 400 | Q = 500 | Q = 600 ||---------------------|--------|--------|--------|--------|--------|--------|| 1 | 440 | 280 | 240 | 240 | 480 | 800 || 2 | 620 | 380 | 240 | 240 | 380 | 620 || 3 | 800 | 480 | 320 | 240 | 280 | 440 |Suppose Ike’s Bikes is currently producing 100 bikes per month in its only factory. Its short-run average total cost is **$440 per bike**.Suppose Ike’s Bikes is expecting to produce 100 bikes per month for several years. In this case, in the long run, it would choose to produce bikes using **one factory**.### Graphical RepresentationOn the following graph, plot the three SRATC curves for Ike’s Bikes from the previous table.- 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)- 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)**.---Illustrate the costs and production strategies effectively to ensure optimal long-term planning and cost-efficiency in operations.*(Note: The provided image contains detailed numerical data which can be used to create accurate graphical representations for **Homework (Ch 13)****Graph Analysis**The provided graph plots the Average Total Cost (ATC) in dollars per bike against the Quantity of bikes produced. - **X-axis:** Quantity of Bikes (from 0 to 700 bikes)- **Y-axis:** Average Total Cost in dollars per bike (from $0 to $640)The graph shows four curves:1. **SRATC1** (purple curve)2. **SRATC2** (orange curve)3. **SRATC3** (green curve)4. **LRATC** (blue curve)The Short-Run Average Total Cost (SRATC) curves vary for different production scales, and the Long-Run Average Total Cost (LRATC) curve represents the minimum average cost for different quantities of production in the long run.**Table Instructions**In the following table, indicate whether the long-run average cost curve exhibits economies of scale, constant returns to scale, or diseconomies of scale for each range of bike production.| Range | Economies of Scale | Constant Returns to Scale | Diseconomies of Scale ||------------------------------------|--------------------|---------------------------|------------------------|| Fewer than 300 bikes per month | (?) | (?) | (?) || Between 300 and 400 bikes per month| (?) | (?) | (?) || More than 400 bikes per month | (?) | (?) | (?) |**Note:** Please fill in each row with the appropriate selection based on the analysis of the LRATC curve.

Short-run is such a period in which at least one of the factors of production is fixed whereas the…

AVERAGE TOTAL COST (Dollars per bike) 640 560 480 400 320 240 160 80 0 0 100 200 300 400 QUANTITY (Bikes) 500 Range Fewer than 300 bikes per month Between 300 and 400 bikes per month More than 400 bikes per month 600 700 SRATC₁ O O SRATC₂ SRATC3 In the following table, indicate whether the long-run average cost curve exhibits economies of scale, constant returns to scale, or diseconomies of scale for each range of bike production. LRATC Economies of Scale Constant Returns to Scale Diseconomies of Scale ο ο ο

AVERAGE TOTAL COST (Dollars per bike) 640 560 480 400 320 240 160 80 0 0 100 200 300 400 QUANTITY (Bikes) 500 Range Fewer than 300 bikes per month Between 300 and 400 bikes per month More than 400 bikes per month 600 700 SRATC₁ O O SRATC₂ SRATC3 In the following table, indicate whether the long-run average cost curve exhibits economies of scale, constant returns to scale, or diseconomies of scale for each range of bike production. LRATC Economies of Scale Constant Returns to Scale Diseconomies of Scale ο ο ο

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

es The following are three short-run average total cost schedules for the only three possible plant sizes, 1, 2, and 3. Find the long-run average cost schedule and show the result in the second table. Size 1 Q 10 20 30 40 50 60 ATC $1.00 90 .85 .88 .93 1.05 Size 2 Q 20 30 40 50 60 70 Long-Run Q 10 90 ATC $.95 .80 .76 .79 .83 .90 Size 3 Q 40 50 60 70 80 90 AC $ ATC $1.00 .87 .84 .80 .95 1.05
Quantity 1 2 3 4 5 6 7 Firm 4 Firm 3 Long-Run Total Cost (Dollars) Firm 1 Firm 1 180 350 510 660 800 930 1,050 Firm 2 120 250 390 540 700 870 1,050 Refer to Table above. Which firm has economies of scale and then diseconomies of scale over the entire range of output? Firm 2 Firm 3 150 300 450 600 750 900 1,050 Firm 4 210 340 490 660 850 1,060 1,290
Discuss the long-run average cost curve. Use the diagram attached as the basisfor your answer.
Fill in the following cost table. For the first few rows, you can work from left to right. However, as you get to the last two rows, you will need to use the information from the right side of the table to work back to the left side. We do not calculate average costs at a quantity of 0. Q TFC TVC TC AFC AVC ATC MC 0 5,000 0 XXXXXX XXXXXX XXXXXX XXXXXX 1 3.000 3,000 2 5,000 3 11,000 4 3,250 5 4,000 Can you tell if this is the short run or long run? Can you tell which level of output yields the highest profit? If so, what is the output level? If not, explain. Economists define the “Break-even Price” as the lowest point on the average total cost curve or the lowest average total cost given in a table. What is the break-even price in this problem? Economists define the “Shutdown Price” as the…
Which of the curves in the following graph is the average total cost curve?
I need the answer as soon as possible
Distinguish between economies of scale and diseconomies of scale. Give examples of why a firm may experience economies of scale.
shows the long-run average costs for Inmode, a manufacturer of Internet modems. Quantity per Day Average Cost ($) a) At what output is minimum efficient scale achieved? Output: b) with what output do diseconomies of scale begin? Output: 1 95 2 85 3 75 4 70 5 65 6 65 7 75 8 100
The shape of the long-run average cost curve is primarily due to: O economies and diseconomies of scale. O technological change. diminishing marginal productivity. O indivisible set-up costs 21 MacBook Pro F8 F9 80 D00 F6 F7 F4 FS %24 &
4.a) Consider the following table for a wheat farmer in long run: Q (wheat) 12 345 6 7 VC (in TK) 20 30 60 120 240 500 700 Calculate ATC for each unit. Then find out minimum efficient scale. b)What are the relationships between ATC and MC? Explain it with a relevant graph.
Give typing answer with explanation and conclusion