The Specialty Cake Store, a monopolistically competitive firm, is producing 200 decorated cakes per day and selling each cake for $12. At that production level ATC is $20, AVC is $15, AFC is $5, and both MR and MC are $8. This firm shouldQuestion 9Answera.increase output to the point where price equals marginal cost.b.shut down and just pay fixed costs.c.decrease output to the point where marginal cost equals average cost.d.continue to produce 200 cakes, as price is greater than AFC.

The monopolistic competition is a type of imperfect competition in which many producers compete…

Answered: The Specialty Cake Store, a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The Specialty Cake Store, a monopolistically competitive firm, is producing 200 decorated cakes per day and selling each cake for $12. At that production level ATC is $20, AVC is $15, AFC is $5, and both MR and MC are $8. This firm should

Question 9Answer

increase output to the point where price equals marginal cost.

shut down and just pay fixed costs.

decrease output to the point where marginal cost equals average cost.

continue to produce 200 cakes, as price is greater than AFC.

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