Final answer:
The manager could negotiate with the vendor or increase the selling price to deal with increased costs. Profitability based on fixed and marginal costs depends on the relationship between these costs and the selling price. Market shifts affecting the computer industry can be illustrated by changes in demand or supply curves.
Step-by-step explanation:
The student asked what a manager could do as first steps to try to keep costs down if the cost of the main component in Computer Corporation's biggest seller has increased by 50%. The correct answer is: Negotiate with the vendor; Increase the selling price. These options would allow the company to attempt to reduce the cost increase and manage the impact on profit margins.
In a situation where a computer company faces fixed costs and varying marginal costs for producing additional units, determining whether the company is making a profit or a loss requires analyzing these costs in relation to the selling price. For instance, if the fixed cost is $250 and the marginal cost of producing seven computers is $700, $250, $300, $350, $400, $450, and $500 respectively, and the computers are sold for $500 each, there would then be a loss incurred on the first unit and varying profits or losses on subsequent units depending on the marginal cost relative to the selling price.
A shift in the computer market that leads to more computers selling at much lower prices can be due to a shift in demand or supply. A downward movement along the demand curve due to lower prices, or a rightward shift in the supply curve due to improvements in technology or increased competition, could both explain this outcome. Managers must consider potential reactions from competitors, such as price undercutting or output adjustment when entering a market dominated by a monopolist.