Question

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?

Answer 1

Taste Freeze should Shut down production so that AVC will decrease.

Step-by-step explanation:

Taste Freeze should Shut down and produce zero sandwiches because price is less than AVC.

Therefore, Taste Freeze should Shut down production so that AVC will decrease.