1 7. 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 expandingproduction to two or even three factories. The following table shows the company's short-run average total cost each month for various levels ofproduction if it uses one, two, or three factories. (Note: Q equals the total quantity of bikes produced by all factories.)Number of Factories123AVERAGE TOTAL COSTUME και320280240200160Q = 100Suppose Ike's Bikes is currently producing 500 bikes per month in its only factory. Its short-run average total cost is s12014080230Suppose 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 bikesusing40320On the following graph, plot the three short-run average total cost curves (SRATC) for Ike's Bikes from the previous table. Specifically, use the greenpoints (triangle symbol) to plot its short-run average total cost if it operates one factory (SRATC1); use the purple points (diamond symbol) to plot itsshort-run average total cost if it operates two factories (SRATC1); and use the orange points (square symbol) to plot its short-run average total costif it operates three factories (SRATC). Finally, plot the long-run average total cost (LRATC) 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.100Q=20060110160Aplia Homework: Production and Cost in the Firmpoints (triangle symbol) to plot its short-run average total cost if it operates one factory (SRATC1); use the purple points (diamond symbol) to plot itsshort-run average total cost if it operates two factories (SRATC₂); and use the orange points (square symbol) to plot its short-run average total costif it operates three factories (SRATCs). Finally, plot the long-run average total cost (LRATC) 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.?Average Total Cost(Dollars per bike)Q=300 Q = 400408040804040Q = 50016011060200300400 500 600QUANTITY OF OUTPUT (Bikes)700SRATCQ = 600320230140SRATC,SRATC,9SRATC,-oper bike.LRATCIn the long run, over which range of output levels does like's Bikes experience economies of scale?Between 300 and 400 bikes per monthMore than 400 bikes per monthFewer than 300 bikes per month

Question

Accepted Answer

Given information:
Ike Bikes is a manufacturer of bikes, currently producing bikes in its only one…