Mrs.Smith operates a business in a competitive market.The current market price is $8.50,and at her profit-maximizing level of production,the average variable cost is $8.00 and the average total cost is $8.25.

Question

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In the short run, Mrs. Smith should continue to operate as long as she is able to cover her variable costs. In this case, her average variable cost is $8.00, which is less than the market price of $8.50. This means that she is able to cover her variable costs and make a contribution toward her fixed costs. As long as she is able to cover her variable costs, she should continue to operate in the short run.

In the long run, Mrs. Smith should continue to operate as long as she is able to cover her total costs, including her fixed costs. Her average total cost is $8.25, which is less than the market price of $8.50. This means that she is making a small profit, but still enough to cover her fixed costs. As long as she is able to cover her total costs, she should continue to operate in the long run. Therefore, the best choice is C.

MrsSmith Operates a Business in a Competitive Market