The equilibrium price of a guidebook is $35 in the perfectly competitive guidebook industry. Our firm produces 10,000 guidebooks for an average total cost of $38, marginal cost of $30, and average variable cost of $30. Our firm should:
A) raise the price of guidebooks, because the firm is losing money.
B) keep output the same, because the firm is producing at minimum average variable cost.
C) produce more guidebooks, because the next guidebook produced increases profit by $5.
D) shut down, because the firm is losing money.
Correct Answer:
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