Ben and Jerry are managers at the company, and they have this discussion: Ben : We should produce 4,000 lamps per month because that will minimize our average costs. Jerry : But shouldn't we maximize profits rather than minimize costs? To maximize profits, don't we need to take demand into account? Ben : Don't worry. By minimizing average costs, we will be maximizing profits. Demand will determine how high the price we can charge will be, but it won't affect our profit-maximizing quantity. Evaluate the discussion between the two managers. Ben's assertion that the firm should produce the quantity of lamps where average costs are minimized is

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Business

Felix Rojas

7 January, 08:58

Ben and Jerry are managers at the company, and they have this discussion: Ben : We should produce 4,000 lamps per month because that will minimize our average costs. Jerry : But shouldn't we maximize profits rather than minimize costs? To maximize profits, don't we need to take demand into account? Ben : Don't worry. By minimizing average costs, we will be maximizing profits. Demand will determine how high the price we can charge will be, but it won't affect our profit-maximizing quantity. Evaluate the discussion between the two managers. Ben's assertion that the firm should produce the quantity of lamps where average costs are minimized is

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Bradley Meadows · Answer 1

Incorrect because profits are instead maximized at the quantity where marginal cost equals marginal revenue, which may be different since marginal revenue depends on consumer demand.