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Perfectly Competitive Business Decisions: Orange Juice

In the perfectly competitive market for orange juice concentrate the current market price is $2.19 per gallon.

a. A firm will maximize profits when its Marginal Costs per gallon are $__
b. Favorable conditions produce a record high harvest yield. We would expect the short-term market price per gallon to ___.
c. An unexpected deep freeze lowers the harvest yield. We would expect the short-term market price per gallon to ___.
d. Following such a freeze, in the short term, what should an individual firm do regarding its Marginal Costs to maximize its profits?
e. Labor costs go up, but market price stays at $2.19 per gallon. What will the firm need to do relative to the size of its workforce in order to maximize its profits?

Solution Preview

a) $2.19
b) Fall, because the market supply curve has shifted to the right, decreasing the ...

Solution Summary

This solution illustrates the decisions that a perfectly competitive seller of orange juice must make when confronted with changing market conditions.

$2.19