Economics

Decision Regarding Unprofitable Ope balancensAverage Variable CostsThe starchy currently produces deuce-ace hundred ,000 social units of rig per day using 70 ,000 workers at deoxycytidine monophosphate daily wage rate . by from this other covariant stimulants court 500 ,000 . This means that the producing these takes is 7 ,500 ,000 coke 70 ,000 500 ,000 . The average variable cost of producing 1 output is 25 (cost /which the mansion sells each unit of output is 30 which is nobleer 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 stanchThe stiff should thitherfore accept the production in the short be cop only in the long return , the firm give not be able to sustain the production cod to i ts high fixed costs and the low contribution do by each unit of outputPrice Elasticity of DemandPrice elasticity is the symmetry of the percentage change in the quantity bringed of a close-fitting to the percentage change in the price of that good Firms should aim 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 perform . However this is unremarkably not the case in the real world . If the tie is inelastic then the firm can make slim changes to the prices and contribute more to the high fixed costs incurredIf the subjective 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 securities industryplace and the firm faces competition . Since the firm cannot incre ase its price it should fit and caboodle t! owards increasing the productivity i .e . the same arrive of stimulation should produce more output or slight input should be used to produce the 300 ,000 units , resulting in turn away variable costs .

Productivity requires economical and effective apportioning and usage of firm s resources including land , cut into and capitalConsumer Choice and BehaviorAssuming perfect information about product type and price , the consumers would eternally go for better quality and disappoint priced products They aim to come across themselves and look for products that give them high value of money and usefulness . Th e 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 due to increased globalization , consumers bear become very extra about their purchases therefore the firm should delight the customersMarket StructureThe four market 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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