Wellstone is a furniture manufacturer for the residential market that creates a variety of furniture pieces for dining room, living room and bedroom. One of the company’s strategies has been to hold prices fixed at their current levels. At a management meeting the president of the company asked about the company’s production goals for the next quarter.
The operations manager responded in favor of increasing production and thinks that it would not affect their average costs, or may even lower them. Assuming that labor is the only variable input, is the operations manager conclusion about increase production right? Explain you answer using the relevant production metrics such us ATC, MC, VC, FC, productivity, etc. (250 world limit)