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Ike's Bikes is a major manufacturer of bicycles. Currently, the company pla 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.) Number of Factories 1 2 3 Q=100 520 660 800 Q=200 400 one factory 480 560 Average Total Cost (Dollars per bike) Q=300 Q=400 320 400 320 400 320 320 = 500 560 480 400 Q = 600 800 660 520 per bike. Suppose Ike's Bikes is currently producing 100 bikes per month in its only factory. Its short-run average total cost is $ 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 4 On the green two factories plot the three short-run average total cost curves (SRATC) for Ike's Bikes from the previous table. Specifically, use the ymbol) to plot its short-run average total cost if it operates one factory (SRATC): use the purple points (diamond symbo plot it three factores de total cost if it operates two factories (SRATC₂); and use the orange points (square symbol) to plot its short-run averag total cost operates three factories (SRATC). Finally, plot the long-run average total cost (LRATC) for Ike's Bikes using the blue points (cine symbol). would like them.connected. Line segments will connect the points automatically.

Ike's Bikes is a major manufacturer of bicycles. Currently, the company pla 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.) Number of Factories 1 2 3 Q=100 520 660 800 Q=200 400 one factory 480 560 Average Total Cost (Dollars per bike) Q=300 Q=400 320 400 320 400 320 320 = 500 560 480 400 Q = 600 800 660 520 per bike. Suppose Ike's Bikes is currently producing 100 bikes per month in its only factory. Its short-run average total cost is $ 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 4 On the green two factories plot the three short-run average total cost curves (SRATC) for Ike's Bikes from the previous table. Specifically, use the ymbol) to plot its short-run average total cost if it operates one factory (SRATC): use the purple points (diamond symbo plot it three factores de total cost if it operates two factories (SRATC₂); and use the orange points (square symbol) to plot its short-run averag total cost operates three factories (SRATC). Finally, plot the long-run average total cost (LRATC) for Ike's Bikes using the blue points (cine symbol). would like them.connected. Line segments will connect the points automatically.

Economics:
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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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.) Number of Factories Q = 100 520 660 800 1 2 3 Q=200 400 480 560 Average Total Cost (Dollars per bike) Q=300 Q=400 320 400 On th 320 400 320 320 Q = 500 560 480 400 Q = 600 800 660 520 per bike. Suppose Ike's Bikes is currently producing 100 bikes per month in its only factory. Its short-run average total cost is $ 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 one factory two factories green plot the three short-run average total cost curves (SRATC) for Ike's Bikes from the previous table. Specifically, use the ymbol) to plot its short-run average total cost if it operates one factory (SRATC): use the purple points (diamond symbol) to plot it three factories ge total cost if it operates two factories (SRATC₂); and use the orange points (square symbol) to plot its short-run average total cost it operates three factories (SRATC₁). Finally, plot the long-run average 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.
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.) Number of Factories Q = 100 520 660 800 1 2 3 Q=200 400 480 560 Average Total Cost (Dollars per bike) Q=300 Q=400 320 400 On th 320 400 320 320 Q = 500 560 480 400 Q = 600 800 660 520 per bike. Suppose Ike's Bikes is currently producing 100 bikes per month in its only factory. Its short-run average total cost is $ 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 one factory two factories green plot the three short-run average total cost curves (SRATC) for Ike's Bikes from the previous table. Specifically, use the ymbol) to plot its short-run average total cost if it operates one factory (SRATC): use the purple points (diamond symbol) to plot it three factories ge total cost if it operates two factories (SRATC₂); and use the orange points (square symbol) to plot its short-run average total cost it operates three factories (SRATC₁). Finally, plot the long-run average 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.
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 (SRATC); and use the orange points (square symbol) to plot its short-run average total cost if it operates three factories (SRATC₂). Finally, plot the long-run average 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. ? AVERAGE TOTAL COST (Dollars per bike) 000 720 640 560 400 400 320 240 100 100 200 300 400 500 QUANTITY OF OUTPUT (kes) 600 700 SRATC SRATC SRATC, LRATC In the long run, ever which range of output levels does Ike's Bikes experience diseconomies of scale O More than 400 bikes per month O Few than 300 bikes per month O between 300 and 400 bikes per month
Transcribed Image Text: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 (SRATC); and use the orange points (square symbol) to plot its short-run average total cost if it operates three factories (SRATC₂). Finally, plot the long-run average 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. ? AVERAGE TOTAL COST (Dollars per bike) 000 720 640 560 400 400 320 240 100 100 200 300 400 500 QUANTITY OF OUTPUT (kes) 600 700 SRATC SRATC SRATC, LRATC In the long run, ever which range of output levels does Ike's Bikes experience diseconomies of scale O More than 400 bikes per month O Few than 300 bikes per month O between 300 and 400 bikes per month
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