Microeconomics 20th Edition by McConnell, Sean Flynn, Stanley Brue

Exercise 5

A perfectly competitive firm that makes car batteries has a fixed cost of $10,000 per month. The market price at which it can sell its output is $100 per battery. The firm's minimum AVC is $105 per battery. The firm is currently producing 500 batteries a month (the output level at which MR = MC). This firm is making a _____________ and should _______________ production.
A) profit; increase
B) profit; shut down
C) loss; increase
D) loss; shut down