Question

The market for tomatoes is perfectly competitive. The equilibrium price in the market is $4.60/kg. When Tom the tomato farmer produces 10,000kg he has an average total cost of $5/kg, a marginal cost of $4.20/kg, and an average variable cost of $4.20/kg. In the short run Tom should: Select one: a. shut down, because he is losing money. b. produce more tomatoes, because that will increase his profit. c. raise the price of tomatoes, because he is losing money. d. keep output the same, because he is producing at minimum average variable cost

Answer 1

option B produce more foniatour , because that will increase his profit i correct option 201 kg Price = $4.60/kg , MC = $4.20/kg AVC=84. In Perfectly Competitive Condition for Profit maximum P = MR=MC عمر Pame Here pomo which mean it can be produced more tomatoes.as a result of which Price will reduced and will become marginal nal Lost equal to m