Provide the rationale for the authors recommendation

Assignment Help Business Economics
Reference no: EM131244433

According to a news agency article, a particular model of car (Sundra) costs $65,000 to produce, while its market price is $34,000. As a result, the author of the article concluded that the automobile company would be losing $31,000 on each Sundra it builds and recommended that the automobile company should not be producing more Sundras. A breakdown of the $65,000 figure was provided as follows:

1. Incurred development costs of about $4.5 billion spread out over the 100,000 cars produced to date, for an average of $45,000 per car; and

2. Cost of building an additional car: $20,000.

Provide the rationale for the author's recommendation that the automobile company should not be producing more Sundras. (Hint: Define, identify and use the concept of average total cost)

Reference no: EM131244433

Questions Cloud

Determine in each case the effects on real gdp : Explain how each of the following will affect the economy, by analyzing each case in an SRAS-AD diagram and determine in each case the effects on real GDP and the general price level:
Company produces one product at the output level : Suppose your company produces one product at the output level (75 units) that minimizes its average cost. At the current level of 75 units, your company’s average cost is equal to $750. What would be this company’s change in total cost if, instead of..
An absolute advantage in producing both products : Two women, Michelle and Tracy, are stranded on an island. Michelle can catch 8 fish per hour or gather 10 coconuts per hour. Tracy can catch 10 fish per hour or gather 40 coconuts per hour. an absolute advantage in producing both products,
Assuming there is no other costs of seeing either performane : You have won a free ticket to see a Charlie Parr concert (which has no resale value). Ewan Dobson is performing on the same night and is your next best alternative activity. Tickets to see Dobson cost $20. On any given day, you would be willing to pa..
Provide the rationale for the authors recommendation : According to a news agency article, a particular model of car (Sundra) costs $65,000 to produce, while its market price is $34,000. As a result, the author of the article concluded that the automobile company would be losing $31,000 on each Sundra it..
Assume the demand curve for golf balls : You are hired as a consultant by FarAwayDrive,  the only golf balls producer in Japan. Assume the demand curve for golf balls in Japan is Q = 180 - 30P. What price will you recommend if FarAwayDrive wants to maximize its total revenues?
Which demand is more price elastic : Assume the demand curve for golf balls in Japan is Qj = 100 - P, while the US demand curve is Qs = 400 - 4P. Over the range of prices, which demand is more price elastic? Please fully justify your answer using the definition of the elasticity of dema..
Cost of producing the current level of output : A firm uses steel and aluminum to produce auto parts. The current input mix used by the firm is such that the marginal product of aluminum is equal to 800 units, while the marginal product of steel is equal to 500 units. how this firm could reduce it..
Ratio of the marginal product of steel to the price of steel : A firm uses steel and aluminum to produce auto parts. The current input mix used by the firm is such that the marginal product of aluminum is equal to 800 units, while the marginal product of steel is equal to 500 units. Please explain in words what ..

Reviews

Write a Review

Business Economics Questions & Answers

  Expansionary policy is used to fix an expansionary gap

Expansionary policy is used to fix an expansionary gap. If US prices are relatively high, the quantity of US goods demanded is high, aote. The short-run AS curve overall has a positive slope in part because of the misperceptions.

  Portfolio investment better than foreign direct investment

Assume that N1 and N2 are neighbors and that N1 is relatively human and physical capital abundant while N2 is relatively labor abundant. Explain why. As a means for less developed countries to attract the savings and investment necessary for economic..

  How many dvds should it order from which supplier

Suppose instead that the station seeks to maximize its profit from sales of the DVDs. What price should it charge. How many DVDs should it order from which supplier.

  What is the equation of constant-elasticity demand function

Revnol, a manufacturer of cosmetics, prices its popular pink lipstick at $8. On the basis of test-marketing, Revnol believes that women between the ages of 18 and 20 have an own-price elasticity of −1.5 and that 60 percent of them are likely to purch..

  Patent harms the benefits of consumers

Tamiflu, produced by Roche, has so far been the most effective medicine to tackle bird flu. Roche was granted a patent on the drug which enables the pharmaceutical firm to charge higher prices and earn higher profits. Monopoly is inefficient as it ch..

  What is meant by the social construction of categories

What is meant by the "social construction of categories"? In what ways are concepts such as gender, race, sexual orientation, social class, and exceptionality social categories?

  Find the long run cost total cost and short run total cost

Consider a firm with a production function F(l, k) = l^{\frac{3}{4}} k^{\frac{1}{4}} , who faces input prices w = 2 and v = 54. Find the long run cost total cost when q=540. Find the short run cost total cost when q=540 and k is fixed at 16. Find the..

  What are the economic profits for the greener way

The revenues and costs of The Greener Way, a lawn care business wholly owned by Mr. Albert Johnston are listed below. Lawn Mowing $63,000 Aeration $2,000 Labour Cost $30,000 Vehicle Costs $15,000 Lawnmower Maintenance $5,000 Debt-Service Costs $13,00..

  Terms of maintenance expense

What other variables should be considered when determining what is reasonable in terms of maintenance expense

  How would this affect the store inventories

While waiting for their buses to leave, they decide to browse your school bookstore and buy some items that catch their eye. How would this affect the store’s inventories?

  Q1 a companys cash sales for the month are 200000 and its

q1. a companys cash sales for the month are 200000 and its accounts receivable payments for the month are 100000. what

  Unconstrained maximization problem

In an unconstrained maximization problem: An activity should be increased if______exceeds______. An activity should be decreased if______exceeds______.The optimal level of activity occurs at the activity level for which______equals.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd