your average total cost is $40; the price you recieve for the good is 12. Should you keep on producing the good?.

Question

Business

Angie Krause

18 December, 01:16

your average total cost is $40; the price you recieve for the good is 12. Should you keep on producing the good?.

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Answers (1)

Know the Answer?

Kaeden · Answer 1

No, not at all. You should not go for producing that good.

Explanation:

A company do business in order to earn profits. A company earns profits by selling the product, good or service they produce or provide to the consumers. But if the cost of producing the goods is more than the profits earned due to that product, then there is no use of doing business. In order to earn profits, the cost of the product produced must be less than the price of that product. The price of the product should be set at a level which can cover all the costs incurred to produce that product. So in this question, if the price is $12 and cost is $40, then there is no need to product that product any more because this product is only incurring loss to the company.