Economic Strategy for Business

* Variable costs: Assumed from exhibit 6. It will increase the same 8% as the variable revenue.

15. In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is ( )

18. If the production function for an economy had constant returns to scale, the labour force doubled, and all other inputs stayed the same, what would happen to real GDP?

3. Market research estimates that monthly equipment production could be increased to 3,500 units which is well within production capacity limitations, if the price were cut from $1,580 to $1,400 per unit. Assuming the cost behavior patterns implied by the data in Exhibit 1 are correct, would you recommend that this action be taken? What would be the impact on monthly sales, costs, and income?

4. A decrease in the demand for a product or service may result in a decrease in wages for people producing that item.  TRUE

Explain how a profit maximizing firm determines its optimal level of output, using marginal revenue and marginal cost as criteria:

* Employees might decrease rate of production as demand decreases to create an impression of need and to preserve jobs

2. The productivity of making product decreased; however, the price of the product increased thus they are increasing profit. Thus,

degree by other forms of labor or capital, both are crucial to the production process. Thus, other inputs

7. Which of the following must be true if a firm is experiencing economies of scale?

11) By how much would the profit contribution of product A has to increase before it will be profitable to produce A?

b. If we assume 2004 prices of 45.91 €/mtt. What does the new break-even level do to the utilization rate, given its new capacity level? What can you say about its effect upon Aget’s pricing?

Thus, we can concluded that the best response goes to hourly rate at $733 with around 10% increases in sales volume and extra revenue increased for $2664 with income improved by $2096 while other variables assuming contains. However, aims to turnaround the situation on shortfall in income, price adjustment to stimulate

average cost. In the short-term, it may be acceptable to price below AC if this price exceeds

Decreasing returns to scale or diseconomies of scale implies rising average costs (AC) as the firm’s output and scale increase (Samuelson and Marks, 2006).