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Running Head: Managerial EconomicsMANAGERIALECONOMICS
Managerial Economics1Question 4Answer a.At the market price of $6, the price will be greater than the average cost. Due to the increment inprice the organization earns a positive economic profit. It means that the organizationcontinuously operate in the short run. It is because the organization earns a positive profit (Mas-Colell, 2014).Answer b.At a market price of $3, the average total cost of the organization will be greater than the pricewhereas the average cost of the variable is less than the price. It means that at the market price of$3, the total revenue is less than the total cost. This indicates that the organization is operating ata negative or a loss economic profit. In spite of loss the organization will operate in short runcontinuously (Kant, 2016). It is because the organization prices are higher than the average costof the variable.Answer c.At the market price of $1, the average cost of the variable is greater than the price making. Onthe other hand, total revenue of the organization is also less than the total cost of theorganization. It means that the organization is operating at a negative or loss economic profit.Moreover, the organization will shut down its operations at short run due to the absence ofrevenue that will cover the variable cost and fixed costs.Answer d.