Asked by
Jerich James Dizon
on Nov 05, 2024
Verified
The Specialty Cake Store, a monopolistically competitive firm, is producing 200 decorated cakes per day and selling each cake for $17. At that production level, ATC is $20, AVC is $15, AFC is $5, and both MR and MC are $8. This firm should
A) continue to produce 200 cakes, as price is greater than AVC.
B) increase output to the point where price equals marginal cost.
C) decrease output to the point where price equals average total cost.
D) shut down and produce zero cakes and just pay fixed costs.
ATC
Average Total Cost, which is the total cost of production (fixed plus variable costs) divided by the quantity of output produced.
AVC
Average Variable Cost, which is the variable cost per unit of output, typically considered in the short run.
AFC
Average Fixed Cost, which is the fixed costs of production divided by the quantity of output produced.
- Ascertain the features and results in monopolistically competitive environments.
Verified Answer
LR
Learning Objectives
- Ascertain the features and results in monopolistically competitive environments.
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