Assume Cathy's Cupcake Company Operates in a Perfectly Competitive Market

question 68

Multiple Choice

Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price exceeds this firmʹs marginal and average variable costs. To maximize profits, Cathy's should

• A) make no adjustments as they are already maximizing their profits.
• B) increase their output.
• C) decrease their output.
• D) stop producing since it is earning a loss.

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Definitions:

Immediate Pay-offs

Benefits or profits that are quickly realized after the implementation of an action or investment, as opposed to long-term gains.

Institutional Investors

Entities such as pension funds, insurance companies, and mutual funds that make large-scale investments in securities and other financial assets.

Analysts on Wall Street

Professionals who research and analyze financial data and trends to give investment advice or recommendations to clients or their employing financial institution.

Sustainable Development

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs, typically considering economic, social, and environmental dimensions.