Question

Select all the items that describe the role of a producer.

Answer 1

You want to charge a price that earns a premium fit , you want to charge a price that covers variable costs

Answer 2

The statements that describe producer roles are the following:

• You want to charge a price that earns profits.
• You want to charge a price that covers variable costs.
• You want to have a large market share.

Producers manufacture and sell goods and services in the product markets aiming to earn a profit from this economic activity.

Therefore, in order to earn profits, the price charged for their products has to contain a profit margin, which is the difference between the amount charged for the product and the total cost beared during its production process.

The price established has to cover at least the variable costs and, afterwards, each unit sold will be contributing toward covering the fixed costs and the generation of profits.

The market share is the % of an industry that is controlled by a firm or group of firms. The larger the market share, the more consumers (higher fraction of the demand) that the firm is serving. Hence the amount of sales will be larger and also the total profit earned.