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astra-53 [7]
3 years ago
12

Kate's Diner offers one breakfast item, a breakfast special. The market price for this meal is $5. At her profit-maximizing leve

l of output, Kate's average variable cost is $4 per meal. Her average total cost is $6 per meal. Since the market is perfectly competitive, Kate should ________.
Business
1 answer:
bazaltina [42]3 years ago
6 0

Answer:

keep producing in the short run but exit the industry or go out of business in the long run

Explanation:

A perfect competition is characterised by many buyers and sellers of homogeneous goods and services. Market prices are set by the forces of demand and supply. There are no barriers to entry or exit of firms into the industry.  

In the long run, firms earn zero economic profit.  If in the short run firms are earning economic profit, in the long run firms would enter into the industry. This would drive economic profit to zero.  

Also, if in the short run, firms are earning economic loss, in the long run, firms would exit the industry until economic profit falls to zero.  

A firm should shut down in the short run if price is less than average variable cost. But since the diner's price is greater than average variable cost, it should continue production.

A firm should exit the industry in the long run if price is less than average total cost. the diner's price is less than average total cost, so it should shut down in the long run

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Horizon Financial Inc. was organized on February 28. Projected selling and administrative expenses for each of the first three m
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Answer:

Depreciation, insurance, and property taxes represent $27,000 of the estimated monthly expenses so will have to be removed to find out how much is due in the month.

                                                                          March           April           May

March Expenses :  

Paid in March                                                   $73,112

Paid in April                                                                          $25,688

April Expenses :  

Paid in April                                                                     $66, 600

Paid in May                                                                                            $23,400

May Expenses :  

Paid in May                                                                                            $‭58,830‬

Total Cash Payment                                        $73,112      $92,288   $82,230

<h2>Working </h2>

March Expenses

Paid in March ((125,800 - 27,000)* 74%) = $73,112

Paid in April ((125,800 - 27,000)*26%) = $25,688.

April Expenses

Paid in April ((117,000 - 27,000)*74%) =  $66, 600

Paid in May ((117,000 - 27,000)*26%) = $23,400

May Expenses

Paid in May ((106,500 - 27,000)*74%) = $‭58,830‬

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3 years ago
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7 0
2 years ago
Supler Corporation produces a part used in the manufacture of one of its products. The unit product cost is $22, computed as fol
notsponge [240]

Answer:

It is cheaper to buy the component.

Financial advantage= $23,500

Explanation:

Giving the following information:

Direct materials $7

Direct labor $8

Variable manufacturing overhead $3

Fixed manufacturing overhead $4

An outside supplier has offered to provide the annual requirement of 4,700 of the parts for only $15 each.

First, we need to calculate the total cost of making the product:

Production in-house:

Total cost= (7 + 8 + 3 + 4)*4,700= 103,400

Buy:

Fixed costs= 2*4,700= 9,400

Buy= 4,700*15= 70,500

Total cost= 79,900

It is cheaper to buy the component.

Financial advantage= 103,400 - 79,900= $23,500

5 0
3 years ago
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