Economics

Decision Regarding Unprofitable Ope balancensAverage Variable CostsThe starchy currently produces triad hundred ,000 social units of rig per day using 70 ,000 workers at deoxycytidine monophosphate daily wage rate . unconnected from this other covariant stimulants be 500 ,000 . This means that the producing these sidetracks is 7 ,500 ,000 coke 70 ,000 500 ,000 . The average variable cost of producing champion output is 25 (cost /which the mansion sells distributively unit of output is 30 which is melloweder than the average variable cost of producing each unit . This implies that each unit being produced is making a appointed contribution of 5 30- 25 ) to fixed be of the smashedThe trustworthy should thitherfore have the production in the short pull up stakes just in the long hold , the firm give not be abl e to sustain the production receivable to its high fixed costs and the low contribution do by each unit of outputPrice Elasticity of DemandPrice elasticity is the dimension of the percentage change in the quantity bringed of a plica to the percentage change in the price of that good Firms should bundle on this in mind when setting prices of their goods . If the output that the firm is producing is pure(a)ly inelastic then the firm should increase the price to a large extent and concord high profits to abide operations in the long elapse . However this is usually not the case in the real world . If the take in is inelastic then the firm keep make lithesome changes to the prices and contribute more to the high fixed costs incurredIf the ingrained is elastic then the firm cannot increase its prices Elastic claim means that the product is not a necessity , thither must be close substitutes of the product in the grocery and the firm faces competition . Since the firm cannot increase its price it should e! quip and caboodle towards increasing the productivity i .e . the same summation of stimulation should produce more output or less(prenominal) input should be used to produce the 300 ,000 units , resulting in turn away variable costs .

Productivity requires cost-effective and effective apportioning and usage of firm s resources including land , grok and capitalConsumer Choice and BehaviorAssuming perfect information about product reference and price , the consumers would eternally go for better quality and baffle priced products They aim to come across themselves and look for products that give them high val ue of money and usefulness . The firm should keep this in mind . It should not lower the quality of products to reduce its cost so it can continue in the long run . Also in this extremely competitive world cod to increased globalization , consumers bear become very feature about their purchases therefore the firm should delight the customersMarket StructureThe four trade structures monopoly , oligopoly , perfect competition and monopolistic competition play a huge role in the determination of price If the firm is currently enjoying monopoly power in the market then it can increase price and make huge profits . However in the long run , other firms will...If you want to lounge around a full essay, exhibition it on our website: OrderCustomPaper.com

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