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.)Number of FactoriesAverage Total Cost(Dollars per bike)Q = 100Q = 200Q = 300Q = 400Q = 500Q = 600136020016024040072025403001601603005403720400240160200360 Suppose Ike’s Bikes is currently producing 600 bikes per month in its only factory. Its short-run average total cost is per bike. Suppose Ike’s Bikes is expecting to produce 600 bikes per month for several years. In this case, in the long run, it would choose to produce bikes usingone factory . 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 (SRATC1SRATC1); use the purple points (diamond symbol) to plot its SRATC curve if it operates two factories (SRATC2SRATC2); and use the orange points (square symbol) to plot its SRATC curve if it operates three factories (SRATC3SRATC3). 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. SRATC1SRATC2SRATC3LRATC0100200300400500600700800720640560480400320240160800AVERAGE TOTAL COST (Dollars per bike)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.RangeEconomies of ScaleConstant Returns to ScaleDiseconomies of ScaleFewer than 300 bikes per month More than 400 bikes per month Between 300 and 400 bikes per month 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 Factories Q = 100Q = 200Q = 300 Q = 400 Q = 500Q = 600136020016024040072025403001601603005403720400240160200360Suppose Ike's Bikes is currently producing 600 bikes per month in its only factory. Its short-run average total cost is$720 per bike.Suppose Ike's Bikes is expecting to produce 600 bikes per month for several years. In this case, in the long run, it would choose to produce bikesusing one factoryOn 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.(?800A720SRATC,840580480SRATC,400320SRATC;240180LRATC80+100200300400500600700QUANTITY (Bikes)AVERAGE TOTAL COST (Dollars per bike) 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 Scale Constant Returns to Scale Diseconomies of ScaleFewer than 300 bikes per monthMore than 400 bikes per monthBetween 300 and 400 bikes per month

Question

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.)Number of FactoriesAverage Total Cost(Dollars per bike)Q = 100Q = 200Q = 300Q = 400Q = 500Q = 600136020016024040072025403001601603005403720400240160200360 Suppose Ike’s Bikes is currently producing 600 bikes per month in its only factory. Its short-run average total cost is per bike. Suppose Ike’s Bikes is expecting to produce 600 bikes per month for several years. In this case, in the long run, it would choose to produce bikes usingone factory   . 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 (SRATC1SRATC1); use the purple points (diamond symbol) to plot its SRATC curve if it operates two factories (SRATC2SRATC2); and use the orange points (square symbol) to plot its SRATC curve if it operates three factories (SRATC3SRATC3). 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. SRATC1SRATC2SRATC3LRATC0100200300400500600700800720640560480400320240160800AVERAGE TOTAL COST (Dollars per bike)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.RangeEconomies of ScaleConstant Returns to ScaleDiseconomies of ScaleFewer than 300 bikes per month    More than 400 bikes per month    Between 300 and 400 bikes per month 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 Factories Q = 100Q = 200Q = 300 Q = 400 Q = 500Q = 600136020016024040072025403001601603005403720400240160200360Suppose Ike's Bikes is currently producing 600 bikes per month in its only factory. Its short-run average total cost is$720 per bike.Suppose Ike's Bikes is expecting to produce 600 bikes per month for several years. In this case, in the long run, it would choose to produce bikesusing one factoryOn 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.(?800A720SRATC,840580480SRATC,400320SRATC;240180LRATC80+100200300400500600700QUANTITY (Bikes)AVERAGE TOTAL COST (Dollars per bike) 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 Scale Constant Returns to Scale Diseconomies of ScaleFewer than 300 bikes per monthMore than 400 bikes per monthBetween 300 and 400 bikes per month

Accepted Answer

Cost can be defined as a concept that shows the amount of expenditure and any other sacrifice such…

Number of Factories	Average Total Cost
(Dollars per bike)
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

Range	Economies of Scale	Constant Returns to Scale	Diseconomies of Scale
Fewer than 300 bikes per month
More than 400 bikes per month
Between 300 and 400 bikes per month