5. Costs in the short run versus in the long runIke'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 = 100Q = 200Q = 300Q = 400Q = 500Q = 60036020016024040072025403001601603005403720400240160200360Suppose Ike's Bikes is currently producing 100 bikes per month in its only factory. Its short-run average total cost is $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 bikesusingOn 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. 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.800720SRATC,640560SRATC,480400320SRATC,240160LRATC80100200300400500600700QUANTITY (Bikes)AVERAGE TOTAL COST (Dollars per bike)

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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 = 100 Q = 200 Q = 300 Q = 400 Q = 500 Q = 600 1. 360 200 160 240 400 720 2. 540 300 160 160 300 540 3 720 400 240 160 200 360 Suppose Ike's Bikes is currently producing 100 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 100 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 = 100 Q = 200 Q = 300 Q = 400 Q = 500 Q = 600 1. 360 200 160 240 400 720 2. 540 300 160 160 300 540 3 720 400 240 160 200 360 Suppose Ike's Bikes is currently producing 100 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 100 bikes per month for several years. In this case, in the long run, it would choose to produce bikes using

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter22: Supply: The Costs Of Doing Business

Section: Chapter Questions

Problem 14E

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