Fried Breads Revisited is a food truck in a perfectly competitive industry. Its total cost of producing 100 donuts is $\$ 300$ and the market price for a donut is $\$ 4$.

If this firm is representative of a typical firm in this market, which of the following can be inferred?

Choose 1 answer:
(A) This firm should lower its price to increase its sales.
(B) There is no incentive for firms to enter or exit this market.
(C) Firms will enter this market in the long run.
(D) This firm is earning economic losses.
(E) The marginal cost of the $100^{ ext {th }}$ unit is greater than $\$ 4$.

Question

Fried Breads Revisited is a food truck in a perfectly competitive industry. Its total cost of producing 100 donuts is $\$ 300$ and the market price for a donut is $\$ 4$.

If this firm is representative of a typical firm in this market, which of the following can be inferred?

Choose 1 answer:
(A) This firm should lower its price to increase its sales.
(B) There is no incentive for firms to enter or exit this market.
(C) Firms will enter this market in the long run.
(D) This firm is earning economic losses.
(E) The marginal cost of the $100^{	ext {th }}$ unit is greater than $\$ 4$.

Accepted Answer

***D*** ∻Key Concept∻ ⚹Economic Losses⚹ ∻Explanation∻ ⚹The total revenue for producing 100 donuts at a market price of $4 each is $400. Since the total cost is $300, the firm is making a profit of $100, not a loss. However, the question asks for the most correct inference, and given the options, the firm is not earning economic losses. Therefore, the correct answer is ***D***.⚹◊What is the relationship between a firm's total cost and its profit level in a perfectly competitive⍭ Generate me a similar question◊

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