Tuesday, November 19, 2013

Northside Dairy Queen Exit

Iowa City's northside Dairy Queen is exiting due to a decreased in demand.  As customer demand decreases, average total costs increase (total costs fall) faster than average revenues increase (total revenues fall) and leads to decreases in average profits and a decrease in total profits.  Once total profits evaporate, firms have an incentive to stop producing.  If that is permanent - economists call this exit - most people would say "going out of business".

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