# solution

Ike’s Bikes is a major manufacturer of bicycles. Currently, the company produces bikes in 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 each month for various levels of production if it uses one, two, or three factories. Suppose Ike’s Bikes is currently producing 500 bikes per month in its (only) factory. Its short-run average total cost is__per bike. Suppose Ike’s 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 __. On the following graph, plot the three short-run average total cost curves for Ike’s Bikes from the previous table Specifically, use the green points (triangle symbol) to plot its short-run average total cost if it operates one factory (SRATC1); use the purple points (diamond symbol) to plot its short-run average total cost if it operates two factories (SRATC2); and use the orange points (square symbol) to plot its short-run average total cost if it operates three factories (SRATC3). Line segments will automatically connect the points. Be sure to plot from left to right. Finally, plot the long-run average total cost (LRATC) for Ike’s Bikes using the red points (cross symbol). Tool tip: Mouse over your points on the graph to see their coordinates to ensure that you’ve plotted them accurately. In the long run, throughout which range of output levels does Ike’s experience economics of scale? More than 400 bikes per month Between 200 and 400 bikes per month Fewer than 200 bikes per month