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 levelof production if it uses one, two, or three factories. (Note: Q equals the total quantity of bikes produced by all factories.)Number of Factories. Q = 50114022303320Q = 10060110160Average Total Cost(Dollars per bike)Q = 150Q = 200404080804040Q = 25016011060Q = 300320230140per bike.Suppose Ike's Bikes is currently producing 300 bikes per month in its only factory. Its short-run average total cost is $Suppose Ike's Bikes is expecting to produce 300 bikes per month for several years. In this case, in the long run, it would choose to produce bikesusing one factoryone factoryOn thetwo factoriesits SRplot the three SRATC curves for Ike's Bikes from the previous table. Specifically, use the green points (triangle symbol) to ploterates one factory (SRATC); use the purple points (diamond symbol) to plot its SRATC curve if it operates two factores (SRA three factories orange points (square symbol) to plot its SRATC curve if it operates three factories (SRATCs). Finally, plot the long-runaverage torar cost (ATC) curve for Ike's Bikes using the blue points (circle symbol) 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 (SRATC); 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.AVERAGE TOTAL COST (Collars per bike)8 & & & & $ 8 8 9400360320200240200160120400050100200150QUANTITY (Bikes)RangeMore than 200 bikes per monthFewer than 150 bikes per month300Between 150 and 200 bikes per month350SRATCIn the following table, indicate whether the long-run average cost curve exhibits economies of scale, constant returns to scale, or diseconomies ascale for each range of bike production,OSRATC₂PSRATO-0LRATOEconomies of Scale Constant Returns to ScaleOODiseconomies of ScaleOOO

Ike's bikers is a major manufacturer of bicycles. It currently produces bikes in one factory, and…

Ike's Bikes is a major manufacturer of bicycles. Currently, the company produces bikes using only one factory. However, it is consi production to two or even three factories. The following table shows the company's short-run average total cost (SRATC) each mc of production if it uses one, two, or three factories. (Note: Q equals the total quantity of bikes produced by all factories.) Number of Factories 1 2 Q=50 Q = 100 140 230 320 60 110 160 Average Total Cost (Dollars per bike) Q = 150 Q = 200 40 40 80 80 40 40 Q=250 Q = 300 160 320 110 230 60 140

Ike's Bikes is a major manufacturer of bicycles. Currently, the company produces bikes using only one factory. However, it is consi production to two or even three factories. The following table shows the company's short-run average total cost (SRATC) each mc of production if it uses one, two, or three factories. (Note: Q equals the total quantity of bikes produced by all factories.) Number of Factories 1 2 Q=50 Q = 100 140 230 320 60 110 160 Average Total Cost (Dollars per bike) Q = 150 Q = 200 40 40 80 80 40 40 Q=250 Q = 300 160 320 110 230 60 140

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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