Types of Market Structures - Economics

If the company decided to sell the new product at price of D.Cr. 8.20, that means the full fixed expense of 1.20 is covered and the company will make high profit. However, the selling price of D.Cr. 8.20 is very high and under this price the company will sell the new product at a lower volume than what the company planned sale volume in the budget and that will affect the company in the market as a strong competitor in the food manufacturing. According to the case, the company sales volume drop to 30 tons when the product was sold at the price of D.Cr. 8.2. Thus, my recommendation are as follows:

During the 1st year, the company has incurred the fixed expense of 120 that it can 't do anything about. But, in the following years the company would go out this market and consequently prevent the fixed expenses incurred. Therefore, the company then would earn profits equal to zero.

The point of profit maximization for the firm in the given scenario occurs at a quantity of 8 units. At this point they have maximized their profit and as you can see to go beyond this point would cause the firm to incur economic losses.

Explain how a profit maximizing firm determines its optimal level of output, using marginal revenue and marginal cost as criteria:

The two graphs attached explain the costs of the considered firm and the general market for the good or service. The store may want to stay open, continuing to produce goods, if the variable costs of producing additional goods can be covered by the price. Another potential option the company is to temporarily shut down operations. On the market graph, if prices for the general market were at the Q1 level and were predicted to increase to the Q2 price later, this would cause an increase profits from producing goods,then it could be beneficial to simply incur the losses in the short-run and stay in business. Either of these are viable options if the increase in cost or temporarily shrinkage of profits are temporary. The reason being that the company could possibly bounce back from the shrinkage of profits. If the increase in costs and reduction in profits is not temporary, then the best option for the company is to go out of business and sell their assets.

We assume that Net fixed assets as percentage of sales will eventually become constant at 1%, and revenue growth rate will eventually become constant at 6%, thus the assumed profit margin will also eventually become constant. It is reasonable to assume that at the beginning the profit margin increases because Crocs enjoys economics of scale and direct sales

A variable cost is a corporate expense that varies with production output. Variable costs are those costs that vary depending on a company's production volume; they rise as production increases and fall as production decreases (Variable Cost, n.d.); in the case study for all cost per event such

Short run needs at least one fixed input because the quantity of product will not be influence by the ups and downs of the economic. Where else, long run uses marginal cost because the company had operated earlier and longer that it is stable and it will not get influence by the economic problems. Assume, that the world economy experience a decline in money. This will force the companies to reduce their cost of production and manufacturing rapidly. The comparison is to show that fixed cost is important for short run company as it is

As an example, if fixed costs are $100, price per unit is $10, and variable costs per unit are $6, then the break-even quantity is 25 ($100 ÷ [$10 − $6] = $100 ÷$4). When 25 units are produced and sold, each of these units will not only have covered its own marginal (variable) costs, but will have also have contributed enough in total to have covered all associated fixed costs. Beyond these 25 units, all fixed costs have been paid, and each unit contributes to profits by the excess of price over variable costs, or the contribution margin. If demand is estimated to be at least 25 units, then the company will not experience a loss. Profits will grow with each unit demanded above this 25-unit break-even level.

The basic difference between absorption and variable costing relates to the handling of fixed manufacturing

All the costs by a company can be broken into two categories, fixed costs and variable costs. Costs that are independent of output are called fixed costs. Fixed costs remain constant throughout the relevant range and are usually considered sunk for the relevant range. Buildings and machinery are included inputs that cannot be adjusted in the short term. They are only fixed in relation to the quantity of production for a certain time period. The cost of all inputs is variable, in the long run.

Lee wasn’t sure why cost of goods sold per unit should fall, because, after all, the efficiency and

The essential relationship between fixed and variable costs is the same whether the budget is static or flexible. The key is that in the flexible budget, both fixed and variable costs are subject to change. In most cases,

This is when smaller firm chooses the same price as the price set by the large firms in the industry.

This equation is solved for the sales volume in units. c. In the graphical approach, sales revenue and total expenses are graphed. The break-even point occurs at the intersection of the total revenue and total expense lines. 8-2 The term unit contribution margin refers to the contribution that