Evaluate the discussion between the two managers

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Reference no: EM131021746

Suppose a firm producing table lamps has the following costs:

Quantity	Averrage Total Cost
1,000	$15.00
2,000	9.75
3,000	8.25
4,000	7.5
5,000	7.76
6,000	8.5
7,000	9.75
8,000	10.5
9,000	12

Ben and Jerry are managers at the company, and they have this discussion:

Ben: We should produce 4,000 lamps per month because that will minimize our average costs.

Jerry: But shouldn't we maximize profits rather than minimize costs? To maximize profits, don't we need to take demand into account?

Ben: Don't worry. By minimizing average costs, we will be maximizing profits. Demand will determine how high the price we can charge will be, but it won't affect our profitmaximizing quantity.

Evaluate the discussion between the two managers.

Reference no: EM131021746

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