Paula is an asparagus farmer and the world asparagus market is perfectly competi

Question

Paula is an asparagus farmer and the world asparagus market is perfectly competitive.

Paula is an asparagus farmer and the world asparagus market is perfectly competitive. The market price is $12 a bundle. Paula sells 1, 100 bundles a week and her marginal cost is $13 a bundle. The market price falls to $10 a bundle, and Paula cuts her output to 688 bundles a week. Paula's average variable cost and marginal cost fall to $10 a bundle. Paula is. not maximizing profit because marginal revenue does not equal marginal cost not maximizing profit because she has cut her asparagus production maximizing profit and she is making an economic profit maximizing profit and she is incurring an economic loss not maximizing profit because she is incurring an economic loss

Explanation / Answer

C. maximizing profit and she is making an economic profit.

This is because initially MC is greater than the market price so she suffers loss. But when price decreases and marginal cost also becomes equal to it then firm will maximise its profit because P = MC.

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