The Taste Freeze Ice Cream Company is a perfectly competitive firm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. Taste Freeze sells 200 ice cream sandwiches. Its AVC is $4.00 and its AFC is $3.00. What should Taste Freeze do?
A. Increase production so that AFC will decrease.
B. Shut down and produce zero sandwiches because price is less than ATC.
C. Decrease production so that AVC will decrease.
D. Continue to produce because price exceeds AVC.
Answer: D
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