The market price of the product produced by Jones Inc, is $6 per unit, which is higher than the average cost of $4 per unit at the profit maximizing output level. The average variable cost of production is $3.5 per unit. If demand for its product declines due to introduction of cheaper substitutes and the market price of the product falls to $3.8 per unit, which of the following statements will
be true?
a. The firm will close down in the short run.
b. The firm will continue production as long as the market price is above average variable cost.
c. The firm will continue production as long as the market price exceeds fixed cost.
d. The firm will minimize it losses by producing where average variable cost equals $3.8.
B
You might also like to view...
The equilibrium or market clearing price occurs at the point at which
A) quantity demanded equals quantity supplied. B) the supply curve intersects the horizontal axis. C) the demand curve intersects the vertical axis. D) there is a shortage of the desired good.
The President of Ghana launched the COVID-19 business alleviation program in collaboration with the National Board for Small Scale Industries (NBSSI), Trade Associations, and some selected banks. Under the program, the government is giving funds without interest to selected financial institutions for onward lending to businesses at a 3% interest. The program is aimed at helping beneficiaries to sustain their businesses during the Covid-19 pandemic. Explain in your own words, the monetary policy tool being used by the government under this program.