Ross is an owner of a donut shop and is subjected to a perfectly competitive market. When the news about health risks brought by sugar consumption went viral, there was a decrease in demand for donuts. As a result, the market price for donuts fell. Ross observed that the new market price for donut is below his minimum AVC. Which of the following statements is true?
Ross is an owner of a donut shop and is subjected to a perfectly competitive market. When the news about health risks brought by sugar consumption went viral, there was a decrease in demand for donuts. As a result, the market price for donuts fell. Ross observed that the new market price for donut is below his minimum AVC. Which of the following statements is true?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Ross is an owner of a donut shop and is subjected to a perfectly competitive market. When the news about
health risks brought by sugar consumption went viral, there was a decrease in demand for donuts. As a result,
the market price for donuts fell. Ross observed that the new market price for donut is below his minimum AVC.
Which of the following statements is true?
Ross should continue his operations while making an economic loss.
Ross is experiencing an Economic Profit of zero after the price decrease.
O Ross should shut down his operations since he cannot pay his fixed and variable costs.
Ross should immediately leave the market.
Ross can increase his prices so he can cover up his costs.
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