Managerial Economics1Question 4Answer a.At the market price of $6, the price will be greater than the average cost. Due to the increment in price the organization earns a positive economic profit. It means that the organization continuously 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 price whereas 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 at a negative or a loss economic profit. In spite of loss the organization will operate in short run continuously (Kant, 2016). It is because the organization prices are higher than the average cost of the variable. Answer c.At the market price of $1, the average cost of the variable is greater than the price making. On the other hand, total revenue of the organization is also less than the total cost of the organization. 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 of revenue that will cover the variable cost and fixed costs.Answer d.
Found this document preview useful?
Managerial Economics - Doclg...
(PDF) The Effects of Market Structure on Industrylg...
Principles of Economicslg...
Business Economics Assignment Solution (pdf)lg...
Economics Assignment on Marginal Cost, Monopoly, Economies of Scale, Qantas Profit, Weak Aussie Dollar and Nash Equilibriumlg...