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 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.)
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 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.)
Chapter22: Supply: The Costs Of Doing Business
Section: Chapter Questions
Problem 14E
Related questions
Question
![TRe'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.
800
720
640
SRATC,
560
480
SRATC
400
320
SRATC,
240
160
LRATC
80
100
200
300
400
500
600
700
QUANTITY OF OUTPUT (Bikes)
In the long run, over which range of output levels does Ike's Bikes experience constant average cost?
O Fewer than 300 bikes per month
Between 300 and 400 bikes per month
O More than 400 bikes per month
AVERAGE TOTAL COST (Dollars per bike)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc9bc8794-1faf-4b80-9c12-acf824da0430%2F8d88fa1a-fce6-43e4-a546-4f6058fe9ba2%2Fak3l8el_processed.jpeg&w=3840&q=75)
Transcribed Image Text:TRe'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.
800
720
640
SRATC,
560
480
SRATC
400
320
SRATC,
240
160
LRATC
80
100
200
300
400
500
600
700
QUANTITY OF OUTPUT (Bikes)
In the long run, over which range of output levels does Ike's Bikes experience constant average cost?
O Fewer than 300 bikes per month
Between 300 and 400 bikes per month
O More than 400 bikes per month
AVERAGE TOTAL COST (Dollars per bike)
![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 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
O = 100
Q = 200
Q = 300
Q = 400
Q = 500
O = 600
1
520
400
320
400
560
800
660
480
320
320
480
660
800
560
400
320
400
520
Suppose Ike's Bikes is currently producing 500 bikes per month in its only factory. Its short-run average total cost is $
per bike.
Suppose Ike's Bikes is expecting to produce 500 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 short-run average total cost curves (SRATC) for Ike's Bikes from the previous table. Specifically, use the green
points (triangle symbol) to plot its short-run average total cost if it operates one factory (SRATC1); use the purple points (diamond symbol) to plot its
short-run average total cost if it operates two factories (SRATC2); and use the orange points (square symbol) to plot its short-run average total cost
if it operates three factories (SRATC3). Finally, plot the long-run averàge total cost (LRATC ) 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.
800
720
SRATC,
640
560
per bike)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc9bc8794-1faf-4b80-9c12-acf824da0430%2F8d88fa1a-fce6-43e4-a546-4f6058fe9ba2%2F2u5qbnk_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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 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
O = 100
Q = 200
Q = 300
Q = 400
Q = 500
O = 600
1
520
400
320
400
560
800
660
480
320
320
480
660
800
560
400
320
400
520
Suppose Ike's Bikes is currently producing 500 bikes per month in its only factory. Its short-run average total cost is $
per bike.
Suppose Ike's Bikes is expecting to produce 500 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 short-run average total cost curves (SRATC) for Ike's Bikes from the previous table. Specifically, use the green
points (triangle symbol) to plot its short-run average total cost if it operates one factory (SRATC1); use the purple points (diamond symbol) to plot its
short-run average total cost if it operates two factories (SRATC2); and use the orange points (square symbol) to plot its short-run average total cost
if it operates three factories (SRATC3). Finally, plot the long-run averàge total cost (LRATC ) 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.
800
720
SRATC,
640
560
per bike)
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