Garret sells grapes in a perfectly competitive market. The market price for 1 ton of grapes is $1,000. Garret has 7 tons of grapes to sell. If his total variable cost is $5,600 and his total fixed cost is $1,500, then Garret should continue producing grapes to minimize his loss.

Question

Quizplus · Accepted Answer

Garret's total revenue from selling 7 tons of grapes at $1,000 per ton is $7,000. His total cost (variable plus fixed) is $7,100 ($5,600 + $1,500). By continuing to produce, his loss is $100 ($7,000 - $7,100), which is less than his total fixed cost of $1,500. If he stops producing, he would still incur the total fixed cost without generating any revenue, leading to a greater loss. Therefore, continuing to produce minimizes his loss.

Garret Sells Grapes in a Perfectly Competitive Market