Model Answer

The influence that average cost has on short run production is that when the output of a production run is small the average cost will be higher as the fixed costs are spread across a small number of units of output. Therefore as the production

b) Strict pollution control: This has the potential to decrease the value of the firm if the firm cannot adapt to the changes in requirements. If the firm allows the stricter requirements to hamper production, then the value of the firm would decrease. However, if the firm has planned for this threat by having flexibility when making business plans or creating new technology to take advantage of the Go Green movement, then there is an opportunity to increase the value

7. Which of the following must be true if a firm is experiencing economies of scale?

A.) The relationship between the cost curves and production curves is that business decide what to produce, how to produce it, and for who to produce it. So the firm is an organization that hire factors of production and organization to them to produce and sell goods. And the cost of producing fall under output

11) By how much would the profit contribution of product A has to increase before it will be profitable to produce A?

a) Greater amounts of capital goods must be sacrificed to produce each additional unit of consumption goods.

(1 marks) Firm A,as product quantity of demand increase, price remain the same Firm B: imperfect

It represtents the marginal propensity to consume. It is the fration of income which is consumed and it lies between 0 and 1.

1b. There will be a negative profit in a long run when other firms come out of the industry. It will keep going on until the price rises to a certain point.

ii. Market growth: it is easier to grow if the market in which the firm is operates in also growing

| as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.

The substitute goods. In more detail if the price increase in a product then the consumers will prefer to buy its substitute and its demand will increase. For example if the price of pork raises the demand for lamp will rose.

However, this phenomenon can be understood from price perspective; the increase in demand, for a normal good will increase the price, whereas the decrease, in demand, for normal good will decrease price.

For improving the economic results of a firm there are two possibilities a) reducing costs b) increasing revenues:

What proportion of the variation in sales is explained by the independent variables in the equations? How confident are you about this answer? Explain.