Explain the company capable to produce more or less and decrease or increase production.
1. For a perfectly competitive company the price is $2 per unit. At this price the company is producing and selling 10,000 units. It costs $1.50 to capable to produce the last unit. Should the company capable to produce more? Less? Why?
2. The Taste Freeze Ice Cream Store is a perfectly competitive company producing where MR = MC. The market price of an ice cream cake is $5.00. Taste Freeze sells 200 ice cream cakes. Its AVC is $8)00 and its AFC is $3.00. Taste Freeze should?
1. Continue to capable to produce since price exceeds AFC.
2. Shut down and capable to produce zero ice cream cakes since price is less than AVC.
3. Decrease production so which AVC would decrease.
4. Increase production so which AFC would decrease.