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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: HB who wrote (38906)	12/10/1998 12:08:00 PM
From: yard_man	Read Replies (1) \| Respond to of 132070

I appreciate your comment about fixed and variable or running costs. Suppose that the capcacity of one firm is not insignificant in the particular industry, though. So part of the fixed cost is written off and the capacity is fired up into full production -- producing a profit on the variable costs and any remainder of fixed or variable costs that are left (supposing it was sold to someone at that attractive price). Now there would be significant production by someone who's costs are signiicantly below the costs seen by other producers. If it is a commodity (one chip as good as another <g>), the other producers either lower prices or lose market share. So unless there is an increase in demand more "fixed investment" is put in peril of being revalued lower. Beyond this the purchase of capital equipment used to produce these goods becomes much less attractive than it would be had the one firm just shut its doors. For the intermediate to longer term, in some cases, it would seem that when production gets much larger than demand, it would be healthier overall for a some assets simply not to be used -- rather be written off and shut down.