The scenario is: Ike is manufacturer of bikes. Currently, the company produces bikes in one factory. However, Ike is considering expanding production to two or even three factories.
The table shows the company’s short-run AVERAGE TOTAL cost each month for various levels of production if it uses 1, 2 or 3 factories (Q = quantity of bikes)
The table looks like this
# of factories______Average Total Cost
_________Q=100 Q=200 Q=300 Q=400 Q=500
1_________560___420___420___630___980
2_________840 ___560___420___560___840
3_________980___630___420___420___560
Suppose Ike’s factory is expected to produce 500 bikes per month for several years. In this case, in the long-run, it would choose to produce bikes using ___ 1/2/3 factories___???
I understand the short-run questions which I already answered for my hw. I am just confused with the long-run. I don't understand how it works and therefore, how many factories should Ike use in the question above. Please help. I would really appriciate it
The table shows the company’s short-run AVERAGE TOTAL cost each month for various levels of production if it uses 1, 2 or 3 factories (Q = quantity of bikes)
The table looks like this
# of factories______Average Total Cost
_________Q=100 Q=200 Q=300 Q=400 Q=500
1_________560___420___420___630___980
2_________840 ___560___420___560___840
3_________980___630___420___420___560
Suppose Ike’s factory is expected to produce 500 bikes per month for several years. In this case, in the long-run, it would choose to produce bikes using ___ 1/2/3 factories___???
I understand the short-run questions which I already answered for my hw. I am just confused with the long-run. I don't understand how it works and therefore, how many factories should Ike use in the question above. Please help. I would really appriciate it