“A firm sells 1,000 units per week. It charges $70 per unit, the average variabl
ID: 2816249 • Letter: #
Question
“A firm sells 1,000 units per week. It charges $70 per unit, the average variable costs are $25, and the average costs are $65.a. What should the firm do in the short run? Why? b. What should the firm do in the long run? Why? c. At what price would the firm consider shutting down in the short run? d. At what price would the firm consider shutting down in the long run? Can you please show the steps as to how you resolved the question. “A firm sells 1,000 units per week. It charges $70 per unit, the average variable costs are $25, and the average costs are $65.
a. What should the firm do in the short run? Why? b. What should the firm do in the long run? Why? c. At what price would the firm consider shutting down in the short run? d. At what price would the firm consider shutting down in the long run? Can you please show the steps as to how you resolved the question. “A firm sells 1,000 units per week. It charges $70 per unit, the average variable costs are $25, and the average costs are $65.
a. What should the firm do in the short run? Why? b. What should the firm do in the long run? Why? c. At what price would the firm consider shutting down in the short run? d. At what price would the firm consider shutting down in the long run? Can you please show the steps as to how you resolved the question.
Explanation / Answer
a. The Firm in short run should always try to recover variable costs spent on making the product available. Thus the company's Break Even price in short run is $25. As the current price of the product is $70 there is no problem as far as short term is concerned.
b. The Firm in Long run should always try to recover total costs spent on making the product available. Thus the company's Break Even price in Long run is $65. As the current price of the product is $70 there is no problem as far as Long term is concerned.
c. As said in (a), The company should consider shutting down in short run if it is not able to meet variable costs. Thus the price at which firm consider shutting down is $25
d. As said in (b), The company should consider shutting down in Long run if it is not able to meet Total costs. Thus the price at which firm consider shutting down is $65
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