Decrease and increase production

Reference no: EM1311859

For a perfectly competitive firm the price is $2 per unit. At this price the firm is producing and selling 10,000 units. It costs $1.50 to produce the last unit. Should the firm produce more? Less? Why?
The Taste Freeze Ice Cream Store is a perfectly competitive firm producing where MR = MC. The market price of an ice cream cake is $5.00. Taste Freeze sells 200 ice cream cakes. Its AVC is $8.00 and its AFC is $3.00. Taste Freeze should?

Continue to produce since price exceeds AFC.
Shut down and produce zero ice cream cakes since price is less than AVC.
Decrease production so that AVC would decrease.

Increase production so that AFC would decrease

Reference no: EM1311859

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