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Managerial Econmics

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Suppose you own a home remodeling company. You are currently earning short- run profits. The home remodeling industry is an increasing- cost industry. In the long run, what do you expect will happen to …
a. …your firm’s costs of production? Explain.
b. …the price you can charge for your remodeling services? Why?
c. …profits in home remodeling? Why?

  • Managerial Econmics -

    for b i have 2 possible answers
    Prices are dependent on marginal costs, therefore prices will also increase.
    or is it that
    The price charged will decrease since with short-run profits, more companies enter the market to compete and the extra competition drives prices down.

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