Question 1
The Razor-Thin Disposable Razor Company is a perfectly competitive firm producing where
MR =
MC. The current market price of a disposable razor is $3.00. The firm sells 1,800 disposable razors. Its
AVC is $2.00 and its
AFC is $1.50. What should Razor-Thin do?
Question 2
The Speedy Typesetting Company, a perfectly competitive firm, is currently producing where
P =
MC and is earning a normal profit. The yearly licensing fee that this firm must pay for the use of a statistical software program was just increased from $1,000 to $1,200. In the short run, this firm will most likely
Answer 1
Continue to produce because price exceedsAnswer 2
continue to produce the same amount of output because only its fixed costs have increased.