Question

Assume that you are going to start a small business of your own.

Describe the business and discuss the following:

1. What costs you would incur;
2. What competition you might experience;
3. How you would determine the price you would sell your product; and,
4. How much product you would produce?

Answer 1

Answer : As I am opening small restaurant I.e small scale business. In the small scale business, the opening of small restaurant at local market place providing different variety of food available to them.The business include the setting up of the restaurant include prepare food according to taste and culture as well as marketing of the restaurant and location of a restaurant in a proper manner.

A : Fixed cost has been incurred such as purchasing a location for a restaurant or space where restaurant has been opened.

Variable cost such as cost of material, waiter salary, cook salary and electricity expenses .

B: Competition has been faced by a restaurant company is a monopolistic competition as there are many sellers but selling slightly differentiated product in the market place. So, the restaurant business faces a monopolistic competition.

C: Price should be set in such a manner that in the beginning in order to grab price should be set in such a manner that they able to cover variable cost. Once the taste has been developed related to the food higher price has been charged.

D : Product should be produced where Marginal revenue is equal to Marginal cost I.e profit maximisation point. The profit should be maximum where MR=MC.