Jessica owns a company that makes pre-packaged sandwiches for convenience stores

Question

Jessica owns a company that makes pre-packaged sandwiches for convenience stores. The market price for a sandwich is $5 and Jessica is a price-taker. Her daily cost for making sandwiches is C(Q) = 2.5Q + (Q2/40) and her marginal cost is
MC = 2.5 + (Q/20). What should Jessica do if she has an unavoidable fixed cost of $150 a day?

A.

She should keep producing sandwiches because she has a positive sales quantity

B.

She should keep producing sandwiches because she is maximizing profit at the current quantity

C.

She should shut down production because his profit less the unavoidable cost is negative

D.

She should shut down production because his profit less the unavoidable cost is positive

A.

She should keep producing sandwiches because she has a positive sales quantity

Explanation / Answer

She should keep producing sandwiches because she is maximizing profit at the current quantity.

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