Short run production decisions - price decline
Not what you're looking for?
A firm produces 10 units per week at a price of $500 each. With AFC of $100 and AVC $350 per unit, the firm is earning economic profits of $500 per week. If the price of the product declines to $400, should the firm continue to produce this product? Explain your answer.
Purchase this Solution
Solution Summary
This post shows how the firm can decided whether to continue the operations in short run or not.
Solution Preview
The answer will depend upon whether we are taking a decision in short run or in long run. Short run is a period in which some costs are pre-committed (fixed) and cannot be changed even if we stop production. Whereas in long run all costs can be ...
Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.