Ike's Bikes is a major manufacturer of bicycles. Currently, the company produces bikes using only one factory. However, it is considering expandingproduction to two or even three factories. The following table shows the company's short-run average total cost (SRATC) each month for various levelsof 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 FactoriesQ = 75Q = 150Q = 225Q = 300Q = 375Q = 450130100801001402001651208080120165320014010080100130Suppose Ike's Bikes is currently producing 375 bikes per month in its only factory. Its short-run average total cost is Sper bike.Suppose Ike's Bikes is expecting to produce 375 bikes per month for several years. In this case, in the long run, it would choose to produce bikesusing 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 plotits 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-runaverage total cost (LRATC) curve for Ike's Bikes using the blue points (circle symbol).Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.(?200180SRATC,180140SRATC,12010080SRATC,6040LRATC2075150225300375450525QUANTITY (Bikes)In the following table, indicate whether the long-run average cost curve exhibits economies of scale, constant returns to scale, or diseconomies ofscale for each range of bike production.RangeEconomies of ScaleConstant Returns to ScaleDiseconomies of ScaleFewer than 225 bikes per monthMore than 300 bikes per monthBetween 225 and 300 bikes per monthAVERAGE TOTAL COST (Dollars per bike)O o o

Quantity SRATC1 SRATC2 SRATC3 LRATC 75 130 165 200 130 150 100 120 140 100 225 80 80 100 80…

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 leve 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 = 75 Q = 150 Q = 225 Q = 300 Q = 375 Q = 450 %3D 1 130 100 80 100 140 200 2 165 120 80 80 120 165 200 140 100 80 100 130 Suppose Ike's Bikes is currently producing 375 bikes per month in its only factory. Its short-run average total cost is s per bike. upnese Tlce's Dilkes is duce 2 75 bilkoS ong run it would co bile

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 leve 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 = 75 Q = 150 Q = 225 Q = 300 Q = 375 Q = 450 %3D 1 130 100 80 100 140 200 2 165 120 80 80 120 165 200 140 100 80 100 130 Suppose Ike's Bikes is currently producing 375 bikes per month in its only factory. Its short-run average total cost is s per bike. upnese Tlce's Dilkes is duce 2 75 bilkoS ong run it would co bile

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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