### Explanation of the Graph and Table#### GraphThe graph displays the relationship between the quantity of bikes produced per month and the average total cost in dollars per bike. It includes the following cost curves:- **SRATC$_1$**: Short-Run Average Total Cost Curve 1- **SRATC$_2$**: Short-Run Average Total Cost Curve 2- **SRATC$_3$**: Short-Run Average Total Cost Curve 3- **LRATC**: Long-Run Average Total Cost Curve**X-axis**: Represents the quantity of bikes produced, ranging from 0 to 700.**Y-axis**: Represents the average total cost in dollars per bike, ranging from 0 to 800.Each curve follows a U-shape, indicating an initial decrease in cost with increased production, followed by an eventual increase.#### TableThe table is intended to classify the long-run average cost curve based on economies of scale for different production ranges:| Range | Economies of Scale | Constant Returns to Scale | Diseconomies of Scale ||--------------------------------|--------------------|---------------------------|-----------------------|| More than 400 bikes per month | ○ | ○ | ○ || Between 300 and 400 bikes per month | ○ | ○ | ○ || Fewer than 300 bikes per month | ○ | ○ | ○ |The table allows users to assess whether the long-run average cost (LRATC) curve exhibits:- **Economies of Scale**: Cost per unit decreases with increased production.- **Constant Returns to Scale**: Cost per unit remains constant with increased production.- **Diseconomies of Scale**: Cost per unit increases with increased production.Users are to select the appropriate category for each specified range of bike production. **Understanding Average Total Cost in Production****Ike’s Bikes Production Overview:**Ike’s Bikes is a major manufacturer of bicycles. The company currently uses only one factory to produce bikes but is considering expanding to two or even three factories. Below is a table showing the company's short-run average total cost (SRATC) per month for different production levels using one, two, or three factories. (Note: Q represents the total quantity of bikes produced by all factories.)| Number of Factories | Q = 100 | Q = 200 | Q = 300 | Q = 400 | Q = 500 | Q = 600 ||---------------------|---------|---------|---------|---------|---------|---------|| 1 | 360 | 200 | 160 | 240 | 400 | 720 || 2 | 540 | 300 | 160 | 200 | 300 | 540 || 3 | 720 | 400 | 240 | 160 | 200 | 360 |**Current Production Status:**- Currently, Ike’s Bikes is producing 500 bikes per month using a single factory with a short-run average total cost of $400 per bike.**Future Production Plan:**- When planning to produce 500 bikes per month for several years, Ike’s Bikes would select the option of using three factories.**Graphing SRATC Curves:**- To visualize these costs, plot the SRATC curves based on the data: - **One Factory (SRATC₁):** Use green points (triangle symbol). - **Two Factories (SRATC₂):** Use purple points (diamond symbol). - **Three Factories (SRATC₃):** Use orange points (square symbol).- Additionally, plot the long-run average total cost (LRATC) using blue points (circle symbol).**Note:**Points should be plotted in the desired order, and line segments will connect these points automatically for clarity in understanding cost trends at various production levels.

Economies of scale occurs when there are certain cost effective advantages are accuring to a firm…

Answered: Economies of Scale Constant Returns to…

Economies of Scale Constant Returns to Scale Diseconomies of Scale han 400 bikes per month en 300 and 400 bikes per month chan 300 bikes per month

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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