Bikes is major manufacturer of bicycles

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Reference no: EM131172791

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. Suppose Ike's Bikes is currently producing 600 bikes per month in its only factory. Its short-run average total cost is $800 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 using three factories. 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 if it operates one factory (SRATC_1); use the purple points (diamond symbol) to plot its short-run average total cost if it operates two factories (SRATC_2); and use the orange points (square symbol) to plot its SRATC if it operates three factories (SRATC_3). Finally, plot the long-run average total cost (LRATC) for Ike's Bikes using the blue points (circle symbol).

Reference no: EM131172791

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