Perfect Competition Case Study
The M.D of ‘Gearing Up’, which is a company producing race bikes, is worried with the present scenario. Rhea company in 2007 lost 5 margin points on the sale of new bicycles and with the recession coming up, there might be a continuation of an unfortunate trend of losing money on the sale of these bikes. The retailers and suppliers of the U.
S race biking industry, which are huge in number, lost sleep over how much to commit for and Nat to bring to the market.
And with all this activity to become the market leader, no seller has a negligible impact on the market price. Along with ‘Gearing Up’ there are other companies also which are into a deep problem with the losses coming up and are gradually winding up. The M.D of the company, though troubled with the present scenario, has a feeling that if somehow through some strategies, the company can Annuitants this horrific situation, and the future might bring in a condition where it can increase its market share.
So he feels that rather than closing down, sustaining wrought innovative strategies might bring in a better future.
Objective ? Huge in number they can’t impact in price it’s a perfectly competitive industry
IQ . Case 1 = loss. Explained clearly
Q. Higher cost as well as loss. Average cost will go up.
Bag variable cost may go up. Price is going up, average variable cost is also going up. Bag cost must remain above the price
IQ) Do you feel that in the future the company might increase its market share?
Q) Rhea M. D plans to sustain, rather than closing down. Can you come up with a condition beyond which sustaining is not possible.