Farmer jones is producing wheat and must accept the market price of $6.00 per bushel. at this time,

4 answers
Question:

Farmer jones is producing wheat and must accept the market price of $6.00 per bushel. at this time, her average total costs and her marginal costs both equal $8.00 per bushel. her average variable costs are $5 per bushel. in order to maximize profits or minimize losses in the short run, farmer jones should ) increase output.(b) increase selling price.(c) produce zero output and close down.(d) continue producing, but reduce output.

Answers

Answer is D. reduce output but continue production.

Refer below.

Explanation:

Farmer Jones is producing wheat, and must accept the market price of $6.00 per bushel. At this time, her average total costs and her marginal costs both equal $8.00 per bushel. Her average variable costs are $5 per bushel. In choosing her optimal output, farmer Jones should:

reduce output but continue production

D. Reduce Output but continue production

Explanation:

Since marginal cost equals average total cost, it can be deduce that she's operating at her most productively efficient region. But she's force to sell at a price lower than her average total cost which could indicate a loss in profit. This means that she should stop production. But then again, her average variable cost is less than the market price, therefore it is adviceable for her to reduce output but continue to produce.

Jones will increase output .

Step-by-step explanation:

The market price of Farmer Jones' per bushel wheat = $6.00

Her average total costs and her marginal costs both are equal $8.00 per bushel.

Since the price of bushel is greater than average variable cost, so Jones will continue the producing.

Profit maximization requires equality of price with marginal cost. As market price is less than marginal cost,

Jones will increase output until price equals the marginal cost to maximize her profit.

sell more

Explanation:

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