Suppose that the market for candy canes operates under conditions of perfect competition,that it is initially in long-run equilibrium,that the price of each candy cane is $0.10,and that the market demand curve is downward sloping.The price of sugar rises,increasing the marginal and average total costs of producing candy canes by $0.05.In the short run,a typical producer of candy canes will be making:

Question

Quizplus · Accepted Answer

The increase in marginal and average total costs means that the typical producer's cost curves have shifted upward. In the short run, the price of candy canes remains at $0.10 due to market conditions, so the typical producer will not be able to cover their increased costs. This will result in a loss and negative economic profit for the producer.

Suppose That the Market for Candy Canes Operates Under Conditions