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Question: “5. Costs in the short run versus in the long run Ike’s Bikes is a major…”

Answer: “5. Costs in the short run versus in the long run Ike’s Bikes is a major…”

Suppose Ike’s bikes…… $ 360 per bike.

Suppose Ike’s bikes…….. using one factory.

More than 400 bikes per month: diseconomies of scale.

Fewer than 300 bikes per month: economies of scale.

Between 300 and 400 bikes per month: constant returns to scale.

Relevant knowledge

The average total cost is the amount of total production costs a firm incurs. A firm that produces at the lowest average total cost will maximize its profits over the long-term. When choosing its size, the firm should select the one that will have the lowest average total cost.

Conclusion

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