Suppose Jason Owns a Small Pastry Shop

question 44

Multiple Choice

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

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

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