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What price and quantity do you think this firm

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1. Overheard at the water cooler: "The demand and cost estimates that were provided at the meeting are very useful [Q =400 - 8P and TC = 600 + 2Q]. Unfortunately, what we did not realize at the time was that our fixed costs were underestimated by at least 40 percent. This means that we'll have to adjust our price upward by at least 40 percent to cover the added fixed cost. In any case there is no way in the world we can survive by charging less than $28.00 for our product."

a. Comment on this statement. Do you agree with the speaker? Explain.

b. What price and quantity do you think this firm should charge and produce if it wants to maximize its short-run profit? Explain.

Reference no: EM132548939

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