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In December 1998, after a year in which Asian demand for B.C. lumber had fallen dramatically, an article in The Globe and Mail had the following headline: “Drastic Cost Reductions Needed to Save 13 B.C. Sawmills”.
a) Does this headline suggest that B.C. lumber companies are not profit maximizers?
b) If Long Run unit costs are “too high”, what is stopping the lumber companies from simply moving down their LRAC curves?
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Evaluate the factors involved in making decisions about pricing tobacco products indicating which would be the most influential.
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