Asked by Brian Henry on May 31, 2024
Verified
Refer to Figure 15.5. Assume The Custom Sweater Shop has fixed costs of $500 and is a monopolistically competitive firm. If the firm is attempting to maximize profits in the short run, the ________ quantity is 100 personalized sweaters.
A) break-even
B) profit-minimizing
C) loss-minimizing
D) shut down
Monopolistically Competitive
A market framework where numerous companies offer products that are alike but not exactly the same, providing room for a bit of market influence and variation in products.
Fixed Costs
Costs that do not vary with the level of output or sales, such as rent, salaries, or insurance premiums.
Profit-Minimizing
A situation in which a business aims to reduce its profits to minimize taxes or for strategic reasons, contrary to typical profit-maximizing objectives.
- Recognize tactics to enhance profitability or decrease financial shortfalls in the near future.
Verified Answer
ZK
Zybrea KnightJun 03, 2024
Final Answer :
C
Explanation :
In a monopolistically competitive market, a firm maximizes profit or minimizes losses by producing at a quantity where marginal revenue equals marginal cost. The statement implies that producing 100 personalized sweaters is the firm's best response to minimize losses, given its fixed costs and the market structure, rather than breaking even, profit maximizing, or shutting down.
Learning Objectives
- Recognize tactics to enhance profitability or decrease financial shortfalls in the near future.