Assume that a Bulgarian Wine Company, the BulgarWine, has the following cost structure for the year 1995.BulgarWine used old technology in year 1995 and suffered from inadequate marketing and brand recognition.

PriceMC AVC AFC

BulgarWine ------2.5lv2.2 lv.0.5 lv

Wine Industry 4.25lv. 2lv.2 lv.0.4 lv

(Average)

BulgarWine's market share= 4% of the Bulgarian wine market

Elasticity of demand for BulgarWine = -3

Elasticity of demand for the Wine Industry=-1.5

a)Consider the cost structure of BulgarWine. What is the minimum price that the company should charge to avoid a "shut-down" decision and stay in business in the short-run? What is the minimum price to be charged to be profitable?