Winona's Fudge Shoppe is maximizing profits by producing 1,000 pounds of fudge per day. If Winona's fixed costs unexpectedly increase and the market price remains constant, then the short run profit-maximizing level of output
A)is less than 1,000 pounds.
B)is still 1,000 pounds.
C)is more than 1,000 pounds.
D)becomes zero.

Question

Quizplus · Accepted Answer

In the short run, the profit-maximizing level of output is determined by the marginal cost and marginal revenue. An increase in fixed costs does not affect the marginal cost or the market price, so the profit-maximizing level of output remains the same.

Winona's Fudge Shoppe Is Maximizing Profits by Producing 1,000 Pounds