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Author Question: Suppose Jason owns a small pastry shop. Jason wants to maximize his profit, and thinking back to the ... (Read 667 times)

theo

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Suppose Jason owns a small pastry shop. Jason wants to maximize his profit, and thinking back to the 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) No; In order to maximize profit, Jason would never want to produce the quantity where average total cost is minimized.
  B) 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.
  C) Not necessarily; Depending on demand, Jason may maximize profit by producing a quantity other than that where average total cost is at a minimum.
  D) Not necessarily; This strategy will only maximize Jason's profit in the long run, but not in the short run.

Question 2

Refer to Figure 12-2. Why is the total revenue curve a ray from the origin?
 
  A) because the firm can sell its product at a constant price
  B) because revenue increases at a decreasing rate
  C) because the firm must lower its price to sell more
  D) because revenue increases at an increasing rate


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