Essay
A firm produces three products A, B, and C. Long-run projected sales per year are 10,000 units of A, 12,000 units of B, and 8,000 units of C.
(a) Determine whether the firm should remain in business under the following conditions:
Good A sells at $5 per unit, and average variable cost (AVC) is $3.5. Good B sells at $7.5 per unit, and AVC is $5. Good C sells at $10 per unit, and AVC is $7.50. Total fixed cost is $60,000 per year.
(b) If the firm allocates fixed cost using standard accounting practices, what is the total accounting profit for each good?
Correct Answer:
Verified
Correct Answer:
Verified
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