Asked by
Christopher Amponsah
on Nov 04, 2024
Verified
Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, marginal cost exceeds this firmʹs price. Assuming price exceeds average variable cost, to maximize profits Cathy's should
A) make no adjustments as they are already maximizing their profits.
B) increase their output.
C) decrease their output.
D) stop producing since it is earning a loss.
Marginal Cost
A measurement of the cost incurred by producing one additional unit of a product or service.
Average Variable Cost
The per-unit cost that varies, calculated through the division of total variable costs by the quantity of products made.
- Familiarize oneself with the conditions and impacts of involvement in a perfectly competitive market environment.
- Identify the association between marginal cost, marginal revenue, average total cost, and optimizing profits.
Verified Answer
RZ
Learning Objectives
- Familiarize oneself with the conditions and impacts of involvement in a perfectly competitive market environment.
- Identify the association between marginal cost, marginal revenue, average total cost, and optimizing profits.
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