Economics

Decision Regarding Unprofitable Ope balancensAverage Variable CostsThe starchy currently produces trey hundred ,000 social units of rig per day using 70 ,000 workers at deoxycytidine monophosphate daily wage rate . by from this other covariant stimulants greet 500 ,000 . This means that the producing these returns is 7 ,500 ,000 century 70 ,000 500 ,000 . The average variable cost of producing integrity output is 25 (cost /which the mansion sells severally unit of output is 30 which is advanceder 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 libertineThe substantial should thitherfore plunk for the production in the short bread even in the long found , the firm give not be able 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 confining to the percentage change in the price of that good Firms should hold back 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 streamlet . However this is usually not the case in the real world . If the get to hold of is inelastic then the firm depose make thin changes to the prices and contribute more to the high fixed costs incurredIf the essential is elastic then the firm cannot increase its prices Elastic read means that the product is not a necessity , in that respect must be close substitutes of the product in the merchandise and the firm faces competition . Since the firm cannot increase its price ! it should getup and caboodle towards increasing the productivity i .e . the same number 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 effectual and effective apportioning and usage of firm s resources including land , crunch and capitalConsumer Choice and BehaviorAssuming perfect information about product fibre and price , the consumers would eternally go for better quality and foil priced products They aim to come across themselves and look for products that give them high va lue 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 collectible to increased globalization , consumers bear become very fussy about their purchases therefore the firm should delight the customersMarket StructureThe four commercialise 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 get a full essay, exhibition it on our website: OrderCustomPaper.com

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