Vintage Camera T Temple MIS G isYou have the following data for product X: salesrevenue $14,000, allocated fixed costs $12,000,variable costs $20,000. You cannot increase the priceof product X or improve the production process toincrease profitability. What should you do aboutproduct X?O do nothing - unprofitable products are just one of thecosts of doing businessO keep the product both in the short term and in the longtermO keep the product in the short term and drop it in the longtermO drop the product both in the short term and in the longtermO drop the product in the short term and keep it in the longterm

There are two types of production processes, short-run, and long-run production processes. Short-run production means a production process where at least one factor of production will be fixed factor. In the long run, all factors of production are variable. Option fourth is right, here the total revenue is less than the total cost,and the total variable cost of production is greater than the total cost. Therefore the fourth option is right. It is good to drop production for both the short run and the long run. Even if the total cost is greater than the total revenue, still production can continue if the total revenue is greater than the variable cost. Then there is a chance to improve profit. But here both total cost and variable cost are greater than the total revenue.The first statement is wrong because the loss incurred in a business is not the cost of doing it. The loss can be caused due to various reasons. According to the second statement, it is wrong to keep the production for both long runs as well as short runs because the revenue cannot cover the variable cost so it is better to shut down. In long run, there can be decreasing returns to the production In the third statement, there will be more loss if the production continues for a short period since the variable cost is greater than the total revenue. The fifth statement is wrong to keep the business in the long run because there can be a decreasing return to the scale which can increase the cost of production.Therefore from the given options, the fourth one is the right choice to drop the business in the short run itself. By doing so the producer can save from further losses.

Answered: Vintage Camera T Temple MIS G is You…

Business

Economics

Vintage Camera T Temple MIS G is You have the following data for product X: s

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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