Consider a company that operates in a competitive market, with a typical set of cost curves (Marginal Cost, Average Variable Cost, Average Fixed Cost and Average Cost with typical formats of Microeconomics theory). Consider further that Marginal Costs coincide with Average Total Costs when the firm's output is 200 units of output, at a market price of 50. If market prices fall to 40, the company will produce 180 units of product to maximize its profit. If at this point the Average Fixed Costs per unit of output equals 27 per unit of output, what are your recommendations for this company in the short term? And in the long run?
Consider a company that operates in a competitive market, with a typical set of cost curves (Marginal Cost, Average Variable Cost, Average Fixed Cost and Average Cost with typical formats of Microeconomics theory). Consider further that Marginal Costs coincide with Average Total Costs when the firm's output is 200 units of output, at a market price of 50. If market prices fall to 40, the company will produce 180 units of product to maximize its profit. If at this point the Average Fixed Costs per unit of output equals 27 per unit of output, what are your recommendations for this company in the short term? And in the long run?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter11: Price And Output Determination: Monopoly And Dominant Firms
Section: Chapter Questions
Problem 3E
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