Economics, North West University Explain in what sense actual business enterprises
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1) Explain in what sense actual business enterprises differ from the textbook neoclassical models as discussed in Dean, Erik et al. 2016. Principles of Microeconomics: Scarcity and Social Provisioning. OpenStax Economics, Principles of Economics. OpenStax CNX. May 18, 2016.
Consider a new business that invests $20 million into a plant to manufacture loaves of bread. The market for bread is say around $100 million and the new firm expects that it will be able to obtain a market share of around 5%. At that level of production, its per-unit costs will be $2 per loaf. Let us say that it targets a 20% return on its investment. What should the price of a loaf of bread be? Use the principle of full-cost pricing.
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