Settings MinkMink farming is a perfectly competitive industry and all minkmink f

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MinkMink farming is a perfectly competitive industry and all minkmink farms have the same cost curves.When the market price is $4141 a minkmink, farms maximize profit by producing

250250 mink a week. At this output, average total cost is $3939 and average variable cost is $1616 a minkmink.Minimum average variable cost is $99 a minkmink.If the price of a minkmink

falls to $99, the minkmink farmer will ______.

A. shut down

B.produce the profit-maximizing output

C.continue to produce 250250 minkmink a week

D.attempt to raise the price back to $4141 a minkmink

E.either shut down or produce the profit-maximizing output

Explanation / Answer

Answer : option no. A is correct .Because price (which is also average revenue) is less than average variable cost, total revenue is not only less than total cost it is also less than total variable cost. As such, not only does minkmink incur an economic loss by operating, that loss is greater than total fixed cost.

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