### Understanding Short-Run and Long-Run Average Total Costs**Instructions for Plotting SRATC Curves:**1. **Plot SRATC Curves:** - Use *green points (triangle symbol)* for the SRATC curve if Ike’s Bikes operates one factory (SRATC$_1$). - Use *purple points (diamond symbol)* for the SRATC curve if it operates two factories (SRATC$_2$). - Use *orange points (square symbol)* for the SRATC curve if it operates three factories (SRATC$_3$).2. **Plot LRATC Curve:** - Use *blue points (circle symbol)* for the long-run average total cost (LRATC) curve for Ike’s Bikes.**Note:** - Ensure to plot your points in your desired order for line connectivity.- Line segments will automatically connect the plotted points.**Graph Explanation:**- **X-axis:** Represents the *Quantity* of bikes produced, ranging from 0 to 350.- **Y-axis:** Represents the *Average Total Cost* per bike, ranging from 0 to 400 dollars.**Keys:**- SRATC$_1$: Green triangle symbol.- SRATC$_2$: Purple diamond symbol.- SRATC$_3$: Orange square symbol.- LRATC: Blue circle symbol.**Graph Layout:**The graph is currently blank, waiting for data points to be plotted as described above.---### Economies of Scale Analysis Table**Instructions:**In the following table, determine whether the long-run average cost curve demonstrates economies of scale, constant returns to scale, or diseconomies of scale for each specified bike production range.| Range | Economies of Scale | Constant Returns to Scale | Diseconomies of Scale ||---------------------------------|--------------------|---------------------------|-----------------------|| More than 200 bikes per month | ⃝ | ⃝ | ⃝ || Between 150 and 200 bikes per month | ⃝ | ⃝ | ⃝ || Fewer than 150 bikes per month | ⃝ | ⃝ | ⃝ |### Key Concepts to Understand:- **Economies of Scale:** ### 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 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 Table| Number of Factories | Q = 50 | Q = 100 | Q = 150 | Q = 200 | Q = 250 | Q = 300 ||---------------------|--------|---------|---------|---------|---------|---------|| 1 | $220 | $140 | $120 | $160 | $240 | $400 || 2 | $310 | $190 | $120 | $190 | $310 | $ | | 3 | $400 | $240 | $160 | $120 | $140 | $220 |Suppose Ike’s Bikes is currently producing 300 bikes per month in its only factory. Its short-run average total cost is $\_\_\_\_\_\_$ per bike.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 bikes using $\_\_\_\_\_\_\_\_\_$ factories.#### Graph InstructionsOn 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 the average total costs when the company operates only one factory, use purple points (square symbol) to plot the average total costs when the company operates two factories, and use orange points (circle symbol) to plot the average total costs when the company operates three factories.

Ike's Bike is a bicycle manufacturing firm. Currently firm is using only one factory for…

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 (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-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. 400 T

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 (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-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. 400 T

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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