Suppose Jason Owns a Small Pastry Shop

question 23

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:

Liabilities

Financial obligations or debts owed by a business to creditors, which can be current (due within one year) or long-term.