Question

Zoe, the owner of Zoe's Bakery, determines that, at her optimal level of production in the short run, P < ATC and P > AVC. In the short run, Zoe should: Group of answer choices raise the price until she has maximized her profits. continue to operate, as she is making an economic profit. continue to operate, even though she is taking an economic loss. shut down immediately, as she is taking an economic loss.

Answer 1

Answer: continue to operate even though she is taking an economic loss.

Step-by-step explanation:

Since at Zoe's optimal level of production in the short run, the price is more than the average total cost and P > AVC, then she should continue to operate even though she is taking an economic loss.

This is because even though she's making loss as the price is less than the average total cost, since the price is greater than the average variable cost, then she should continue in operation. Assuming P < AVC, then the company should shutdown in this case as only th fixed cost is incurred.