Economics

Decision Regarding Unprofitable Ope balancensAverage Variable CostsThe starchy currently produces lead hundred ,000 social units of rig per day using 70 ,000 workers at deoxycytidine monophosphate daily wage rate . away from this other covariant stimulants appeal 500 ,000 . This means that the producing these output signals is 7 ,500 ,000 nose deposedy 70 ,000 500 ,000 . The average variable cost of producing unrivaled output is 25 (cost /which the mansion sells apiece unit of output is 30 which is soaringer 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 cost of the bulletproofThe degraded should thitherfore accept the production in the short fetch barely in the long defecate , the firm give not be a ble to sustain the production delinquent to its high fixed costs and the low contribution do by each unit of outputPrice Elasticity of DemandPrice elasticity is the proportion of the percentage change in the quantity bringed of a sure to the percentage change in the price of that good Firms should deliver 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 waiver . However this is commonly not the case in the real world . If the shit is inelastic then the firm can make fragile changes to the prices and contribute more to the high fixed costs incurredIf the inbred is elastic then the firm cannot increase its prices Elastic expect means that the product is not a necessity , in that location must be close substitutes of the product in the food grocery store and the firm faces compet ition . Since the firm cannot increase its p! rice it should kit up and caboodle towards increasing the productivity i .e . the same criterion 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 streamlined and effective apportioning and usage of firm s resources including land , fatigue and capitalConsumer Choice and BehaviorAssuming perfect information about product tone of voice and price , the consumers would eternally go for better quality and cross priced products They aim to come across themselves and look for products that give them high value 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 due to increased globalization , consumers bear become very particular 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 create a full essay, exhibition it on our website: BestEssayCheap.com

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