Pie-Oh-My, a monopolistically competitive firm, is producing 80 gourmet pies per day and selling each pie for $32. At that production level ATC is $40, AVC is $30, AFC is $10, and both MR and MC are $16. In the short run, this firm should
A. increase output to the point where price equals marginal cost.
B. shutdown and produce zero pies and pay fixed costs.
C. decrease output to the point where price equals average total cost.
D. continue to produce 80 pies, as price is greater than AVC.
Answer: D
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