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

question 11

Multiple Choice

Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price equals this firmʹs marginal cost. Assuming price exceeds average variable cost, 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.