Say you are the manager of a perfectly competitive firm selling a product. Your

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Say you are the manager of a perfectly competitive firm selling a product. Your business is making a loss because total revenue is less than total costs. What would you do--shut down or continue to operate? Use hypothetical numbers to explain. Information you need to provide include--state the product you are selling, the price of the product, the quantity of the product you produce, fixed costs, total cost, figure out total revenue, total and average variable costs. Then go ahead and make your decision. Explain carefully why it makes better sense to shut down rather than continue to operate or to continue to operate rather than shut down, as the case may be. How do fixed costs play a role in your analysis? What is the difference between shutting down and going out of business? (Original work needed, no copy and paste from google. please help!)

Explanation / Answer

Say you are the manager of a perfectly competitive firm selling a product. Your business is making a loss because total revenue is less than total costs. What would you do--shut down or continue to operate? Use hypothetical numbers to explain. Information you need to provide include--state the product you are selling, the price of the product, the quantity of the product you produce, fixed costs, total cost, figure out total revenue, total and average variable costs. Then go ahead and make your decision. Explain carefully why it makes better sense to shut down rather than continue to operate or to continue to operate rather than shut down, as the case may be. How do fixed costs play a role in your analysis? What is the difference between shutting down and going out of business?

Assume that my firm sells face wash tissues. The product is a homogeneous one with no differentiating features.

Market Price = 5 and i sell 15 units only

TC = 100, TVC =80 and TFC =20 r = 75 this is less than my TVC so i will close and go out of business.

If my Q was 16 then TVC = TR so i would continue in the short run, in the hope that prices will rise in long run ( as firms exit to reduce ss and raise prices) and i would be able to cover my TFC in the long run. this is the level of shut down point where TR =TVC , but the continues to be in operation

2. Think about a firm that you have done business with recently. What industry does this firm belong to? For example, McDonald's is a firm in the fast food industry. What market structure would this industry fall under? What are the names of other firms in this industry? Is it monopolistic competition, oligopoly, monopoly, or perfect competition? Justify your classification of the firm. Use the characteristics/features of the different market structure to determine which market structure to classify your chosen firm.

I dealt with a holiday maker company that sells holiday packages. This will be a n oligopoly structure as:

No of firms is limited to a few.

Each has unique products in terms of pricing, locations , discounts and services offered. But still it belongs to a group of holiday operators

Each firm must consider what its rivals are doing as 1 firm cant ignore what others are offering, otherwise clients will shift to rivals .

Each firm has a limited monopoly over its clients, so dd curve is downward sloping for each firm

The product is heterogenous as each firm tries to offer a unique holiday experience to its customers

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