A Perfectly Competitive Small Organic Farm Produces 1,000 Cauliflower Heads

question 250

Multiple Choice

A perfectly competitive small organic farm produces 1,000 cauliflower heads in the short run.At this quantity,ATC = $6 and AFC = $2.The market price is $3 per head and is equal to MC.To maximize profits or minimize losses,this farm should:

• A)increase output in the short run.
• B)reduce output but continue to produce in the short run.
• C)shut down in the short run.
• D)do nothing because it is already maximizing profits.

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Definitions:

Facility

A physical or virtual location where business operations occur, such as a factory, warehouse, office, or even software platforms.

Period of Time

A length or duration of moments which is measured in terms of seconds, minutes, hours, days, months, or years.

Capacity Decision

A determination made regarding the amount of production resources needed to meet expected demand.

Variable Costs

Costs that vary directly with the level of production or the volume of output.