Answer to Question #310513 in Microeconomics for Priya

Question

You own a printing firm. Two of your senior managers provide you with advice. The first manager states that your company is losing money for every unit that is printed. To minimize losses, she advises that you reduce your production levels. The second manager states that if your firm sells some more units, the price will cover your increase in costs. In order to reduce losses, the second manager recommends that you should increase production. Explain which manager is correct and who is offering the correct advice?

Answer 1

In fact, such companies work under the order. Therefore, when orders increase, production must be increased, and when orders decrease, production must be reduced.