The demand and cost estimate that where provided at the meeting are very useful(Q=90-6.5P and TC=150+3.5Q)
unfortunately what we did not realize at the time was that our fixed cost were underestimate by at least 30 percent this means that we will have to adjust our price upward by at least 30 percent to cover the add fixed cost in any case there is no way in the world that we can survive by charging less than $9 for our product
You are provided with the following additional information:
The price that maximizes short run profit is $8.67 and quantity sold is 33.625 units. The AVC is $3.50, AC before the 30% increase in fixed costs is $7.96, AC after the 30% increase in fixed costs is $9.30.Now, do you agree with speaker to increase the price of the company's product to more than $9? Explain.