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 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 = 50Q = 100Q = 150Q = 200Q = 250Q = 300180100801202003602701508080150270336020012080100180Suppose Ike's Bikes is currently producing 50 bikes per month in its only factory. Its short-run average total cost is $per 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 usingOn 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.(?40030320SRATC,280240SRATC,200180SRATC,80LRATC4050100150200250300350QUANTITY (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 ScaleBetween 150 and 200 bikes per monthMore than 200 bikes per monthFewer than 150 bikes per monthAVERAGE TOTAL COST (Dollars per bike)

Short run average cost curve is the per unit cost of production in the short run. In the short 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.) Average Total Cost (Dollars per bike) Number of Factories Q = 50 Q = 100 Q = 150 Q = 200 Q = 250 Q = 300 %3D %3D 1 180 100 80 120 200 360 2 270 150 80 80 150 270 3 360 200 120 80 100 180 Suppose Ike's Bikes is currently producing 50 bikes per month in its only factory. Its short-run average total cost is s per 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

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.) Average Total Cost (Dollars per bike) Number of Factories Q = 50 Q = 100 Q = 150 Q = 200 Q = 250 Q = 300 %3D %3D 1 180 100 80 120 200 360 2 270 150 80 80 150 270 3 360 200 120 80 100 180 Suppose Ike's Bikes is currently producing 50 bikes per month in its only factory. Its short-run average total cost is s per 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

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

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Problem 1QTC

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Question

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.)
Average Total Cost
(Dollars per bike)
Number of Factories
Q = 50
Q = 100
Q = 150
Q = 200
Q = 250
Q = 300
180
100
80
120
200
360
270
150
80
80
150
270
3
360
200
120
80
100
180
Suppose Ike's Bikes is currently producing 50 bikes per month in its only factory. Its short-run average total cost is $
per 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).

Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.
(?
400
30
320
SRATC,
280
240
SRATC,
200
180
SRATC,
80
LRATC
40
50
100
150
200
250
300
350
QUANTITY (Bikes)
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
Between 150 and 200 bikes per month
More than 200 bikes per month
Fewer than 150 bikes per month
AVERAGE TOTAL COST (Dollars per bike)

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