Question

If krispy kreme is a profit maximizing firm that can sell donuts for 0.99 each, and if the opportunity cost of producing one donut is $1, then krispy kreme should produce and sell this donut

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Answer 1

A profit-maximizing firm should not produce and sell a good if the price is lower than the opportunity cost of production.

Step-by-step explanation:

A profit-maximizing firm, like Krispy Kreme in this case, will produce and sell a good as long as the price is higher than the opportunity cost of production. In this example, the donut is sold for $0.99, while the opportunity cost of producing one donut is $1. Therefore, it would not be profitable for Krispy Kreme to produce and sell this donut.