Bubba's Burgers sells hamburgers in a perfectly competitive market at a price of $1.50 each. At the profit-maximizing (cost-minimizing) level of output, average total cost is $1.90 per hamburger and average variable cost is $1.75 per hamburger
Should the firm continue to operate in the short run? Explain.
No. The price of the firm's product ($1.50) is less than its average variable cost ($1.75). This implies that the firm's revenues will not be sufficient to cover all of the firm's variable costs. Thus, it will earn a smaller loss if it shuts down and earns a loss equal to its fixed costs.
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A. decrease. B. increase. C. either increase or decrease. D. remain constant.
Explain how the CPI is constructed
What will be an ideal response?
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