Asked by
TANNER GOLDBERG
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, price equals this firmʹs marginal cost. 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.
Perfectly Competitive Market
A hypothetical market where all participants are price takers, and goods are perfect substitutes, leading to an efficient distribution of resources.
Average Variable Cost
The average amount of variable cost per unit, calculated by dividing total variable costs by the quantity of output.
- Expound on the profit maximization strategy and its application in the realm of perfect competition.
- Implement the theories of marginal cost and marginal revenue within real-life business settings for the purpose of making informed decisions.
Verified Answer
TD
Learning Objectives
- Expound on the profit maximization strategy and its application in the realm of perfect competition.
- Implement the theories of marginal cost and marginal revenue within real-life business settings for the purpose of making informed decisions.