Suppose Jason Owns a Small Pastry Shop

question 273

Multiple Choice

Suppose Jason owns a small pastry shop.Jason wants to maximize his profit,and thinking back to the college microeconomics class he took in college,he decides he needs to produce a quantity of pastries which will minimize his average total cost.Will Jason's strategy necessarily maximize profits for his pastry shop?

• A) Yes; Since jason's pastry shop is in a perfectly competitive market, the only way to maximize profit is to produce the quantity where average total cost is minimized.
• B) Not necessarily; This strategy will only maximize Jason's profit in the long run, but not in the short run.
• C) No; In order to maximize profit, Jason would never want to produce the quantity where average total cost is minimized.
• D) Not necessarily; Depending on demand, Jason may maximize profit by producing a quantity other than that where average total cost is at a minimum.

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Definitions:

MRP

The marginal revenue product, which represents the additional revenue generated from employing one more unit of a factor, such as labor or capital.

Workers

Individuals engaged in physical or mental effort aimed at producing goods or providing services in exchange for wages.

Perfect Competitor

A market structure where many firms offer products or services that are similar, allowing for free entry and exit, and no single firm can influence the market price.

Imperfect Competitor

An entity in a market that does not hold enough power to dictate the conditions of the market but can influence the price and output of its goods to some extent.