Ike’s Bikes is a major manufacturer of bicycles. Currently, thecompany produces bikes using only one factory. However, it isconsidering expanding production to two or even three factories.The following table shows the company’s short-run average totalcost (SRATC) each month for various levels of production if it usesone, two, or three factories. (Note: Q equals the total quantity ofbikes produced by all factories.)

Average total cost (dollars per bike)

# of factories	Q=25	Q=50	Q=75	Q=100	Q=125	Q=150
1	130	100	80	100	140	200
2	165	120	80	80	120	165
3	200	140	100	80	100	130

Suppose Ike’s Bikes is currently producing 25 bikes per month inits only factory. Its short-run average total cost is

per bike.

Suppose Ike’s Bikes is expecting to produce 25 bikes per monthfor several years. In this case, in the long run, it would chooseto produce bikes using   .

On the following graph, plot the three SRATC curves for Ike’sBikes from the previous table. Specifically, use the green points(triangle symbol) to plot its SRATC curve if it operates onefactory (SRATC1SRATC1); use the purple points (diamond symbol) toplot its SRATC curve if it operates two factories (SRATC2SRATC2);and use the orange points (square symbol) to plot its SRATC curveif it operates three factories (SRATC3SRATC3). Finally, plot thelong-run average total cost (LRATC) curve for Ike’s Bikes using theblue points (circle symbol).

Note: Plot your points in the order in which you would like themconnected. Line segments will connect the points automatically.

Plot SRATC1 SRATC2 SRATC3 SRATC

200

180

160

140

120

100

0 25 50 75 100 125 150 175\

In the following table, indicate whether the long-run averagecost curve exhibits economies of scale, constant returns to scale,or diseconomies of scale for each range of bike production.

Range	Economies of Scale	Constant Returns to Scale	Diseconomies of Scale
More than 100 bikes per month
Fewer than 75 bikes per month
Between 75 and 100 bikes per month