Question
In: Economics
In mid-December 2018, the manager of Beau Apparel was preparing the firm’s production plan for the...
In mid-December 2018, the manager of Beau Apparel was preparing the firm’s production plan for the first quarter of 2019. The fore cast of the wholesale price of shirts would be used in making the production decision. The marketing researchers provided the manager with three price forecasts based on three different assumptions about economic conditions in the first quarter of 2019.
High: $20 Medium: $15 Low: $10
The total fixed costs of the production is $30,000. Beau Apparel also estimated an average variable cost function as followed:
AVC=20-0.003Q+0.00000025Q2
Under the high-price forecast, middle-price forecast and
low-price forecast, answer the following questions
respectively:
(a) Should the firm produce or shut down?
(b) If production is warranted, how much should the firm
produce?
(c) Calculate the estimated profit or loss under the three forecasted price levels.
Solutions
Rahul Sunny answered 6 months agoRelated Solutions
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