Answered: WHat happens when a company does not…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

WHat happens when a company does not follow economic heory and charges prices below the marginal revenue point or whenit does not realize the economies of scales????

Curious.
Please explain.
Not a graded question.
I need an explanation

Expert Solution

Introduction

Marginal revenue: It is the revenue that is being generated when an additional unit of output is sold, it is calculated by dividing the change in the total revenue by the change in the output level. Mathematically, it can be written as:

$M R = \frac{∆ T R}{∆ Q} ∆ T R i s t h e c h a n g e i n t h e t o t a l r e v e n u e ∆ Q i s t h e c h a n g e i n t h e o u t p u t$

Economies of scales: A firm is said to have achieved economies of scale when it started having cost advantages because of the larger size of the firm. Economies of scale simply mean a reduction in the cost per unit for a commodity with an increase in the scale of the output.