Aruna owns Pottery Plus, a small firm that produces terra cotta pots for sale in the Edmonton area. 20.0 17.5 15.0 PMC, 12.5 10.0 OMC, 7.5 5.0 2.5 MR 2.5 5.0 7.5 10.0 12.5 15.0 17,5 Quantity per period The graph above represents Aruna's situation. Pottery Plus has two rival firms. Aruna is convinced that she dare not raise her price because her rivals will not raise their prices, and she dare not decrease her price because her rivals will simply match her lower price a. What price does Aruna charge? b. What quantity does she produce? units produced c. If her marginal costs are MC, is she producing the optimal output? (Click to select) ♥ d. If her marginal costs increase to MC2 will she reduce her output? (Click to select) ♥ *Options for c) and d) are: Yes / No Price, costs
Aruna owns Pottery Plus, a small firm that produces terra cotta pots for sale in the Edmonton area. 20.0 17.5 15.0 PMC, 12.5 10.0 OMC, 7.5 5.0 2.5 MR 2.5 5.0 7.5 10.0 12.5 15.0 17,5 Quantity per period The graph above represents Aruna's situation. Pottery Plus has two rival firms. Aruna is convinced that she dare not raise her price because her rivals will not raise their prices, and she dare not decrease her price because her rivals will simply match her lower price a. What price does Aruna charge? b. What quantity does she produce? units produced c. If her marginal costs are MC, is she producing the optimal output? (Click to select) ♥ d. If her marginal costs increase to MC2 will she reduce her output? (Click to select) ♥ *Options for c) and d) are: Yes / No Price, costs
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Question
1
Transcribed Image Text:Aruna owns Pottery Plus, a small firm that produces terra cotta pots for sale in the Edmonton area.
20.0
17.5
15.0
PMC,
12.5
10.0
MC,
E 7,5
5.0
2.5
MR
2.5 5.0
7.5 10.0 12.5 15.0 17.5
Quantity per period
The graph above represents Aruna's situation. Pottery Plus has two rival firms. Aruna is convinced that she dare not raise her price
because her rivals will not raise their prices, and she dare not decrease her price because her rivals will simply match her lower price.
a. What price does Aruna charge?
2$
b. What quantity does she produce?
units produced
c. If her marginal costs are MC, is she producing the optimal output?
(Click to select) ♥
d. If her marginal costs increase to MC2 will she reduce her output?
(Click to select) ♥
*Options for c) and d) are: Yes / No
Price, costs
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