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Table 4.1 reports Lunas weekly expenses. Suppose that wages are 5% higher. a. By recalculating Table 4.1, explain how the increase in wages would affect
Table 4.1 reports Lunas weekly expenses. Suppose that wages are 5% higher. a. By recalculating Table 4.1, explain how the increase in wages would affect the (i) average variable cost, and (ii) average cost. b. Lunas management says that the wage increase has raised its break-even price by 5%. Do you agree? c. Supposing that the market price remains at $50, how should Luna adjust production? d. How would an increase in rent affect your answers to (b) and (c)?
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