Mbeya cement company which has a rising short run marginal cost curve is currently operating at a loss. Mbeya cement company' chief economist chief economist says that if the price rises a little, the output should not be increased because if it's marginal cost would rises and the company would end up with a bigger loss on a higher volume.should the chief executive officer of mbeya cement company listen to the chief economist? Why or why not
3 answers
Yes, the CEO of Mbeya Cement Company should listen to the chief economist. The chief economist is likely familiar with the company's cost structure and the economics of the industry, and is likely in a better position to make an informed decision about the company's pricing strategy. The chief economist's advice is sound, as increasing the price of the product would likely result in a larger loss on a higher volume.
I don't know
Yes,,,,the CEO should listen to the company's cheif economist,,,,at that point it means an industry is operating at shutdown point,,,that is the company can cover only fixed costs such as rent...I think it's the best advise not to rise the price as when then price goes up,demand decline which substantially affects total revenue...Although the company will continue to operate for the following reasons;to keep the company's reputation,,or if the major aim of the firm to provide social services to the society,,,or when the firm thinks that the good times are just coming,,.