Revenue, Cost Concepts and Market Structure Proposal
- Submitted by: tysmith71
- Views: 950
- Category: Politics
- Date Submitted: 12/19/2010 02:25 PM
- Pages: 5
- Report this Essay
Revenue, Cost Concepts and Market Structure Proposal
Taunya Smith
ECO 561
October 4, 2010
Dr. Jerry King
Revenue, Cost Concepts and Market Structure Proposal
Clear Hear is a manufacturer of cell phones. Development specialist Kendra Sherman secured an order for 100,000 cell phones with a delivery date within 90 days, which will support a promotion that a major chain, Big Box, is planning with a telephone service provider (University of Phoenix, 2010).
Kendra has met with production manager Lisa Norman who is interested, but is considering the factory’s total profitability. Currently, Clear Hear runs two production lines at its factory; one line produces the Beta model and the other the Alpha model. The Unit Profitability Report shows that the fixed and variable cost for the Alpha Model are lower than that of the Beta model, and the Beta model yields a higher profit than the Alpha model. Despite the fact unit profits are good and cost controls meet factory standards, the underutilization of capacity deprived Lisa Norman and the factory of profits that could have been earned on an additional 70,000 units, which presents concern for Kendra on whether or not to accept the order (University of Phoenix, 2010).
The decision for Clear Hear is profit maximization in the short run, being Big Box needs this order within 90 days. Clear Hear is considered a monopolistic competitive firm, which means they produce the quantity of output that maximizes profit, which is the difference between total revenue and total cost.
In regard to production alternatives, even though monopoly is slightly more likely to earn economic profit than a perfectly competitive firm, it is not guaranteed an economic profit. Should demand conditions change, it might also incur an economic loss or be forced to shut down in the short run. Comparable to any firm, a monopolistically competitive firm faces three short-run production alternatives based on a...
Taunya Smith
ECO 561
October 4, 2010
Dr. Jerry King
Revenue, Cost Concepts and Market Structure Proposal
Clear Hear is a manufacturer of cell phones. Development specialist Kendra Sherman secured an order for 100,000 cell phones with a delivery date within 90 days, which will support a promotion that a major chain, Big Box, is planning with a telephone service provider (University of Phoenix, 2010).
Kendra has met with production manager Lisa Norman who is interested, but is considering the factory’s total profitability. Currently, Clear Hear runs two production lines at its factory; one line produces the Beta model and the other the Alpha model. The Unit Profitability Report shows that the fixed and variable cost for the Alpha Model are lower than that of the Beta model, and the Beta model yields a higher profit than the Alpha model. Despite the fact unit profits are good and cost controls meet factory standards, the underutilization of capacity deprived Lisa Norman and the factory of profits that could have been earned on an additional 70,000 units, which presents concern for Kendra on whether or not to accept the order (University of Phoenix, 2010).
The decision for Clear Hear is profit maximization in the short run, being Big Box needs this order within 90 days. Clear Hear is considered a monopolistic competitive firm, which means they produce the quantity of output that maximizes profit, which is the difference between total revenue and total cost.
In regard to production alternatives, even though monopoly is slightly more likely to earn economic profit than a perfectly competitive firm, it is not guaranteed an economic profit. Should demand conditions change, it might also incur an economic loss or be forced to shut down in the short run. Comparable to any firm, a monopolistically competitive firm faces three short-run production alternatives based on a...