Asked by cassidy bristow on Sep 23, 2024
Verified
A catering company is producing at a point where its marginal costs are $25 and its fixed costs are $5000.At the current price of $10 it is producing 50 meals.If the demand goes up,such that they can now charge $20 per meal,how much should the firm now produce?
A) 60 meals
B) 70 meals
C) 80 meals
D) None,they should shut down
Marginal Costs
The extra costs incurred from increasing production output by a single unit, essential for determining optimal production levels.
Fixed Costs
Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance.
Demand
The desire and ability of consumers to purchase goods or services at a given price.
- Learn the intricacies of making decisions for operations and investments over short and extended periods.
- Execute the theories of marginal and average costs in establishing production amounts and profit margins.
Verified Answer
SA
Shumukh Alnadhari1 day ago
Final Answer :
D
Explanation :
Given the information, the firm's marginal cost ($25) is higher than the new price ($20) per meal, indicating that the firm would lose money on each additional meal produced. Therefore, it would not be profitable for the firm to increase production; instead, it should consider shutting down or reassessing its cost structure.
Learning Objectives
- Learn the intricacies of making decisions for operations and investments over short and extended periods.
- Execute the theories of marginal and average costs in establishing production amounts and profit margins.