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This year, you have to select your price and production. Your competitors keep charging the same price as last year, $230k. Considering the big increase
This year, you have to select your price and production. Your competitors keep charging the same price as last year, $230k. Considering the big increase in fixed costs, what is the best strategy? One of your advisors suggests that to compensate for the increase in fixed costs, you should raise your price and select your production level by taking the highest quantity such that marginal cost is lower than price. Another advisor thinks that in this situation, average cost strategy is better. According to him, you should choose your production level in order to minimize your average cost. What is your choice? (Of course, both advisors can be wrong...)
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