When a factory is operating in the short run

Homework (Ch 13) 5. Costs in the short run versus in the long run 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'shortcun average total cost (SRATC) each month for various levels of production if it was one, two or the factories. (Note: Q the total quantity of bikes produced by all factories.) uals Average Total Cost (Dollars per bike) Number of factories Q-100 Q = 200 200 Suppose Ike's Bikes is currently producing 500 bike per month in its only factory to sho w erge Suppose Ike 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 prakse SRATC On the following graph, plot the three SRATC cures for le's Bikes from the previous table. Specifically, we the green pobus (triangle symbol) to plotis SRATC erwe i factory (SRATCYw the purple points (diamond symbol) to ploris SRATC curve if it operate face (SRATC, and the Grande Po p if it operates the factories (SRATC). Finally, plor the long-run awerage total cos (LRATC) cure for Ike's Bites in the blue polas (circle symbol). atically Note: Plot your points in the order in which you would like them connected. Line segments will connect the points t
SRATC SRATC AVERAGE TOTAL COST (Dollars per bike) O- SRATC O LRATC 100 200 500 600 700 300 400 QUANTITY (Bikes) In the following table, indicate whether the long-run average cost curve exhibits economies of scale, constant returns to scale, or disconomies of scale for each range of bike production Range Economies of Scale Constant Returns to Scale Diseconomies of Scale Fewer than 300 bikes per month More than 400 bikes per month olol Between 300 and 400 bikes per month