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    Production Economics: Cost Analysis


    "Cost Analysis" : Production Economics & Cost Analysis

    - Using the same good or service from above. Identify the fixed and variables costs are for the good or service. Based upon the costs identified, recommend whether to produce or not produce the good or service. Provide a rationale with your response.

    Thank you for your assistance.


    Solution Preview

    Step 1
    The good I have picked is an orange peeling machine. The price is $3,000. The fixed cost is $1,000 and the variable cost is $1,500. The cost function for orange peeling machines is Fixed + Variable = Total Costs, or $1,000 + $1,500 = $2,500. Price plays an important role in the short run and long run decisions. If the price is higher than the total costs, the company will continue its production in the long run. It may increase its capacity in the long run.

    However, in the short run even if the price is ...

    Solution Summary

    Cost Analysis is discussed step-by-step in this solution. The response also has the sources used.