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Free_Kalibri [48]
3 years ago
11

The Pampered Pet Shop operates in a perfectly competitive industry and hires you as an economic consultant. The firm is currentl

y producing at a point where market price equals its marginal cost. Its market price is less than its average variable cost. You advise the firm to:_____.
a. raise its price until it breaks even.
b. lower it's price so it can sell more units of output.
c. cease production immediately, because it is incurring a loss.
d. produce in the short run to minimize its loss, but exit the industry in the long run.
Business
2 answers:
Vladimir79 [104]3 years ago
8 0

Answer: cease production immediately, because it is incurring a loss

Explanation:

A perfectly competitive industry is an industry whereby firms make similar products, and there are many firms and customers.

Since from the scenario, the market price is less than its average variable cost, it is advisable for the firm to stop producing. This is because the firm isn't covering its variable cost, therefore it's running at a loss.

Sphinxa [80]3 years ago
5 0

Answer:

c. cease production immediately, because it is incurring a loss.

Explanation:

When a business engages in production it looks to make profit. That is for the production price to be higher than cost incurred in producing the good.

However when the price is lower than the average variable cost as is indicated in the scenario then the firm needs to shut down production in the short term.

Factors that will adversely affect a firm in the short term are price, average total cost, and average variable cost.

Once price is less than average total cost or average variable cost it is better to stop production.

As they are incurring an economic loss

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3 years ago
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Answer:

It is more profitable to continue processing the units.

Explanation:

Giving the following information:

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Product B= 6,000 units sold for $106 each

Product C= 11,900 units sold for $52 each

Total cost= $280,000

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Option 2:

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Effect on income= $974,800

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3 years ago
Carmen is a member of a student taskforce that was asked to recommend solutions to the university's budget problem. when she not
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3 years ago
Assume that you have already completed a 5-year international assignment working for KPMG as a Tax Consultant in Singapore.
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From the complete information, Vietnam has low points in the avoidance index. This implies that they're less associated with their cultural roots and don't have concern for hiring white people.

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6 0
2 years ago
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Zanzabum

Answer:

Campus Stop, Inc.

Partial Income Statement

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Sales returns                                    ($1,730)

Sales discounts and allowances <u>  ($2,270)</u>

Net sales                                       $319,300

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