Describe the three general rules for profit maximization for a competitive firm. How could you apply these rules to Bill’s Bagels?
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Description
Maximizing profits is a key strategy for any business, and is typically achieved by deciding upon an optimal production level. Determining the appropriate amount to produce can be challenging, however. Imagine a company that makes cars. This company wants to produce enough cars to maximize profit, but it does not want to increase production of cars beyond the point of diminishing returns. For this assignment, you will examine a fictional company and make recommendations on how the company can become more profitable.
Scenario
You are a store manager at Bill’s Bagels. The store sells more than a dozen types of freshly made bagels and a variety of cream cheeses. They also sell bagel sandwiches at lunchtime. There is a small eat-in area in the store where customers can sit. Your boss, Bill Bayer, is worried that a local competitor is selling more bagels and charging less. He has asked you to review the data and to examine procedures. He also wants you to write your recommendations to maximize profits. Your recommendations should be in one to two pages and include the rationale for your recommendations.
Bill’s Bagels is a competitive firm. The store has the following total cost and total revenue:
Bill has four employees. You are the store manager, and you have three part-time staff members who make bagels and take orders. The store opens at 6 a.m. seven days a week and closes at 4 p.m. seven days a week.
Instructions
1. Read the scenario.
2. Create a one- to two-page Word document in which you answer the following questions and provide a rationale for your recommendations:
• Describe the three general rules for profit maximization for a competitive firm. How could you apply these rules to Bill’s Bagels?
• Calculate Bill’s Bagels’ profit-maximizing price and quantity. Explain how you determined your answers. Recommend a bagel price and quantity to Bill that would maximize profit.
• Consider the strategies of shutting down or exiting the market. Should Bill’s Bagels, a profit-maximizing competitive firm, consider shutting down and/or exiting the market? Should the store consider another opening and closing schedule? Make a recommendation to Bill and explain your recommendation.
3. Save and submit your work to your instructor.
Writing Requirements
• Your responses to each bullet point must be at least one paragraph, and your document should be 250-500 words (one to two pages).
• Your document must be double-spaced using a 12-point font with one-inch margins and include your name at the top of the first page.
• Title page and abstract are NOT required for this assignment
• For citations, follow APA format
• Proofread your document to eliminate mechanical and grammatica
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