Asked by Andrea Perez on Jul 25, 2024
Verified
Winona's Fudge Shoppe is maximizing profits by producing 1,000 pounds of fudge per day. If Winona's fixed costs unexpectedly increase and the market price remains constant, then the short run profit-maximizing level of output
A) is less than 1,000 pounds.
B) is still 1,000 pounds.
C) is more than 1,000 pounds.
D) becomes zero.
Profit-Maximizing
A method or plan designed to maximize profits from business activities.
Fixed Costs
Expenses that remain constant regardless of the amount of goods produced or sold, including lease payments, wage bills, and insurance fees.
Market Price
The existing rate at which an asset or service is offered for buying or selling.
- Examine the conditions under which a firm in a competitive market will earn positive, zero, or negative economic profit.
Verified Answer
PK
Prajil KottoorJul 25, 2024
Final Answer :
B
Explanation :
In the short run, the profit-maximizing level of output is determined by the marginal cost and marginal revenue. An increase in fixed costs does not affect the marginal cost or the market price, so the profit-maximizing level of output remains the same.
Learning Objectives
- Examine the conditions under which a firm in a competitive market will earn positive, zero, or negative economic profit.