Question

Culumber inc. produces three sepearate products from a common process consting 100,100. each of the products can be sold at the split off point or can be processed furthur and then sold for a higher proic. shown below are cost and selling price data for rent

Answer 1

The price a firm sets for its product is based on the cost of production and the desired profit margin. When production costs increase, the firm usually raises the product's price, which is indicated on the supply curve. This is important for competitive pricing and maintaining profitability.

Step-by-step explanation:

Businesses need to determine a strategic price point for their products, which is composed of two primary components: the cost of production and the desired profit. The cost of production includes all expenses involved in making the product, such as raw materials, labor, and overhead costs. The desired profit is the additional amount the business aims to make over the cost of production, which is influenced by industry profit margins and market conditions.

When the cost of production changes, such as an increase in the cost of cheese for pizza making, the firm will typically pass this increase onto the customer by raising the price. This new price is represented on the supply curve as a higher price point above the original equilibrium. Understanding this concept helps businesses to price their products competitively while ensuring profitability. It also aids in predicting how changes in production costs can affect pricing strategies.