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Firm Zero has 435 clients and Firm Nine has 555 clients. Both firms have a fixed...

Firm Zero has 435 clients and Firm Nine has 555 clients. Both firms have a fixed cost of $24,500 and a variable cost of $110xi, where xi is firm i's client number. In this case, the competitive price for Firm Zero is _____ and for Firm Nine it is _____.

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Answer #1
  • Variable costs vary based on the amount of output, while fixed costs are the same regardless of production output.
  • Examples of variable costs include labor and the cost of raw materials, while fixed costs may include lease and rental payments, insurance, and interest payments.
  • Competitive pricing is the process of selecting strategic price points to best take advantage of a product or service based market relative to competition.
  • Competitive pricing is used more by businesses selling similar products, since services can vary from business to business, while the attributes of a product remain similar.
  • Competitive pricing is generally used once a price for a product or service has reached a level of equilibrium.
  • competitive price for Firm Zero is
    • $24,500 + $110*435 = $72,350
  • competitive price for Firm Nine is
    • $24,500 + $110*555 = $85,550
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