Question: Overheard at the water cooler: The demand and cost estimates that were provided at the meeting are very useful [Q = 90 - 6.5P and

Overheard at the water cooler: "The demand and cost estimates that were provided at the meeting are very useful [Q = 90 - 6.5P and TC = 150 + 3.5QJ. Unfortunately, what we didn't realize at the time was that our fixed costs were underestimated by at least 30 percent. This means that we'll have to adjust our price upward by at least 30 percent to cover the added fixed cost. In any case, there is no way in the world that we can survive by charging less than $9 for our product."
a. Comment on this statement. Do you agree with the speaker? Explain. Illustrate your answer with the use of a graph indicating the firm's short-run cost structure.
b. What price do you think this firm should charge if it wants to maximize its short-run profit?

Step by Step Solution

★★★★★

3.27 Rating (153 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a b If we assume that the firm uses the MR MC rule to determine its optimal price then it should not ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

935-B-E-M-E (6551).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

The Huffman coding algorithm requires prior statistical knowledge about the information source and such information is often not available. The solution is to use Adaptive Huffman coding algorithm....

Overheard at the water cooler in the corporate headquarters of a large manufacturing company: "The competition is really threatening us with their new product line. I think we should consider...

Overheard at the water cooler: "I think our company should take advantage of economies of scale by increasing our output thereby spreading out our overhead costs." Would you agree with this statement...

Refer to Amandas production possibilities curve in the previous problem. Amanda meets Raj at the water cooler and finds out that Raj also needs to review 250 documents and process 250 insurance...

1.Overheard at the water cooler: "The demand and cost estimates that were provided at the meeting are very useful [Q =400 - 8P and TC = 600 + 2Q]. Unfortunately, what we did not realize at the time...

1. Describe the communication process. 2. Understand the importance of feedback in the communication process. 3. Understand various verbal and nonverbal methods of communication. 4. Understand the...

PLEASE COMPLETE NO LATER THAN 10/07 @8:00AM Each question(1,2,& 3) must be a minimum of 200 words. Please make answers detailed and knowledgeable based off the attached reading. ARE YOU ABLE TO...

Please see attachment. All three question need to be answered in narrative format. If you have questions, just let me know. Normal requirement for references are 2 outside our course text....

Sunk Costs: What Do You Sea? the following case questions by preparing an analysis to guide Festival Cruise Line 's decisions. Help Festival decide whether it should fully fund all of the recommended...

OPERATIONS MANAGEMENT ASSIGNMENT 6 1 Human resources, project management and operations management are all equally vital to a business's success. Each of these focuses on different areas of the...

RLS Logistics It was a cold, colorful morning in New Jersey on Tuesday, October 22, 2019, when Kyle Koel, business development manager at RLS Logistics (RLS), was informed by his business coordinator...

MachineTech sold a machine to a customer for Rs 50 million on 1st July 2019. The machine is covered by a 5-year warranty for all repairs. The price of the machine without the warranty is 45 million...

QUESTION 3 [19 Marks] 3.1 Find the load impedance in Figure below for maximum power to the load. Show all the diagrams. Z =j9 and Z = 8 (9) 3.2 Determine the voltage across the load impedance using...

Retained earnings primarily represent a company's: Select one: a . Accumulated net income or net loss less accumulated dividends b . Undistributed cash since the company's creation c . Undistributed...

A group of wine enthusiasts taste-tested a pinot noir wine from Oregon. The evaluation was to grade the wine on a 0 to 100 point scale. The results follow: (a) Construct a stem-and-leaf diagram for...

On a cold, dry morning after a frost, the temperature was -5C and the partial pressure of water in the atmosphere fell to 0.30 kPa. Will the frost sublime? What partial pressure of water would ensure...

In Fig. 19-53, let V = 78 V and C1 = C2 = C3 = 7.2F. How much energy is stored in the capacitor network?

A 0.40-F and a 0.60-F capacitor are connected in series to a 9.0-V battery. Calculate (a) The potential difference across each capacitor, and (b) The charge on each. (c) Repeat parts (a) and (b)...

Three long parallel wires are 3.9cm from one another. (Looking along them, they are at three corners of an equilateral triangle.) The current in each wire is 8.00A, but its direction in wire M is...

Critics of the cooperative economy suggest that it can lead to stagflation. Evaluate the pros and cons of this argument.

Suppose you have announced you will meet the competition in response to entry threats by a potential rival who has done marketing research in your target market and is offering a lower price point....

Calculate the eight-hour-shift costs of operating a taxi with a medallion license that cost $125,000 borrowed at 10 percent interest assuming two shifts for 365 days per year, plus a $25,000 car that...

A math graduate student explains to her friend how to approach a group of smart attractive guys who have brought along famous actor Russell Crowe. What should her friend do? Ignore Russell Crowe or...

Capital Budgeting: Estimating Cash: Cash Flow Estimation and Risk Analysis: Real Options DCF analysis doesn't always lead to proper capital budgeting decisions because capital budgeting projects are...

4. Assume that Goodman Industries stock has a required return of 13%. You will use this required return rate to discount the dividends calculated earlier. If you plan to buy the stock, hold it for 3...

Question 5 Analysts at OilFirmX are considering how much to bid in a government auction for drilling rights in a new lease area in the Gulf of Mexico. Using forward prices for oil, the analysts have...