Question
You run a chemical company.After conducting a market forecast, you are convinced that the price for a particular chemical compound (compound X) will remain at
You run a chemical company.After conducting a market forecast, you are convinced that the price for a particular chemical compound (compound X) will remain at a fixed level of p = p' for several years.(E.g., demand for compound X is perfectly elastic at p = p' because there exist other chemical substitutes.) After conducting a cost analysis, you conclude that for any amount of output, p' is less than your current average variable cost, but p' is greater than your average long-run cost if capital is chosen optimally. What should you do? Be specific regarding the time frame.
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