Suppose That the Market for Candy Canes Operates Under Conditions

question 107

Multiple Choice

Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Now suppose that the price of sugar rises, increasing the marginal and average total costs of producing candy canes by $0.05. Based on the information given, we can conclude that in the short run a typical producer of candy canes will be making:

• A) an economic profit.
• B) zero economic profit.
• C) negative economic profits.
• D) It is impossible to determine based on the information given.

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