Economics

Decision Regarding Unprofitable Ope balancensAverage Variable CostsThe starchy currently produces three hundred ,000 social units of rig per day using 70 ,000 workers at deoxycytidine monophosphate daily wage rate . Apart from this other covariant stimulants cost 500 ,000 . This means that the producing these outputs is 7 ,500 ,000 100 70 ,000 500 ,000 . The average variable cost of producing one output is 25 (cost /which the mansion sells each unit of output is 30 which is higher 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 costs of the firmThe firm should thitherfore abide the production in the short start However in the long give , 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 ratio of the percentage change in the quantity bringed of a faithful to the percentage change in the price of that good Firms should carry 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 run . However this is ordinarily not the case in the real world . If the make is inelastic then the firm can make svelte 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 demand means that the product is not a necessity , there must be close substitutes of the product in the market and the firm faces competition . Since the firm cannot increase its price it should kit and caboodle towards increasing the productivity i .e . the same amount of stimulation should produce more output or less input should be used to produce the 300 ,000 units , resulting in turn away variable costs .

Productivity requires efficient and effective apportioning and usage of firm s resources including land , labor and capitalConsumer Choice and BehaviorAssuming perfect information about product quality 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 . 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 get a full essay, exhibition it on our website: Ordercustompaper.com

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