Question

ung.cengage.com Mind Map Cengage Learning CENGAGE | MINDTAP Homework (Ch 13) 5. Cests in the short run versus in the long run Baskes is a major manufacturer of bicycles. Currently, the company produces bikes using only one factory. However, it is considering expending production to two or even three factories. The following table shows the company's short run werage total cost (SRATC) each month for various levels of production Vituses one, two or three factories. (Note: Qequals the total quantity of bikes produced by all factores) Average Total Cost Q-25 Q 130 165 200 50 100 120 140 (Dollars per Mke) Q = 75 100 0 100 80 80 100 0 Q=125 140 120 100 150 200 165 130 Suppose Ike's Bikes is currently producing 50 bikes per month in its only factory. Its short-run average total cost is perbike Suppose The's Bees is expecting to produce so bile per month for several years. In this case, in the long run, it would choose to produce bikes using On the following graph, plot the three SRATC curves for restes from the previous table Specifically, use the green points (triangle symbol to por its SRATC curve it operates one factory (SRATC use the purple points (amond symbol) to plotis SRATC curve if it operates two factories SRATC2), and use the orange points are symbol) to po SRATC curve operates three factories (SRATC). Finally, pie the long run average total cost (LRATC) curve for using the po o rde symbol Note: Plot your posts in the order in which you would like the connected. Line segments will connect the points automatically MacBook Air

Answer 1

Blanks-

1) 130

2) 1 factory

	Average total cost (Dollars per bike) at the various quantity (Q)
No. Of Factories	25	50	75	100	125	150
SRATC 1	130	100	80	100	140	200
SRATC 2	165	120	80	80	120	165
SRATC 3	200	140	100	80	100	130
LRATC	130	100	80	80	100	130

SRATC 1 SRATC 2 -=SRATC 3 *LRATC 0 20 40 60 80 100 120 140 160

Between 75 and 100 = constant returns

more than 100 = diseconomies of scale

less than 75 = economies of scale