The table below lists the short-run costs for One Guy's Pizza. If One Guy's can sell all the output they produce for $12 per unit, how much should One Guy's produce to maximize profits? Does One Guy's Pizza earn an economic profit in the short-run?
Definitions:
Variable Costs
Expenses that change in proportion to the level of production or sales volume, such as raw materials or direct labor costs.
Profit
The financial gain obtained when the revenues generated from business activities exceed the expenses, costs, and taxes involved in sustaining the activities.
Fixed Costs
Expenses that do not change with the level of goods or services produced by a business, such as rent, salaries, and insurance.
Unit Variable Cost
The cost associated with producing one additional unit of a product, which includes labor, materials, and other variable expenses.
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