Assignment:
Introduction
You have now been introduced to the perfect competition. Consider profit maximization in perfect competition.
Instructions
As a recent graduate of this college, you have landed a job in production management for Universal Clones, Inc. You are responsible for the entire company on weekends.
Your costs are shown below.
Quantity Average Total Cost
500 200
501 201
Your current level of production is 500 units. All 500 units have been ordered by your regular customers.
The phone rings. It's a new customer who wants to buy one unit of your product. This means you would have to increase production to 501 units. Your new customer offers you $450 to produce the extra unit. Please answer the following questions in essay format using concepts, and theories:
a. Should you accept this offer? Explain in detail.
b. What is the net change in the firm's profit? Explain.