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Unformatted text preview: company cut its net profit forecast by 38 per cent to Y150bn at the end of October and conditions for electronics companies have deteriorated since then. Sony’s decision to close factories and cut jobs, in some extent, might be an example of the company shut down case when the price is greater than the minimum average variable cost. As world economy is struggling with recession, consumer spending dramatically decreases. The market of more elastic products such as luxury Sony notebooks and desktops tends to be hit more seriously by the drop of consumer spending. In other words, these products’ demand certainly decreases as the consumer confidence falls. When demand falls below the minimum average variable cost, the firm will choose to shut down....
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- Spring '05
- Consumer spending, average variable cost