Question

Outpuit AFC AVC ATC MC 1 $300 $100 $400 $100 2 150 75 225 50 3 100 70 170 60 4 75 73 148 80 5 60 80 140 110 6 50 90 140 140 7 43 103 146 180 8 38 119 156 230 9 33 138 171 290 10 30 160 190 360 These are cost data for a company that is selling in a purely competitive market. If the market selling price for the firm's output is $180, the competitive firm will produce

Answer 1

Answer: 7 units at an Economic Profit of $238

Step-by-step explanation:

A Purely Competitive Firm is known to maximise profit at the point where Marginal Revenue equals Marginal Cost because at this point, all resources are being utilized fully.

The Marginal Revenue refers to the products Price so.the Marginal Revenue in this case is $180.

The Unit that corresponds to a Marginal Cost of $180 is 7 units from the above table.

This means that the firm.will produce 7 units.

At 7 units, the revenue is,

= 7 * 180

= $1,260

At 7 units the Total Cost ( Average Total Cost) is,

= 7 * 146

= $1,022

The Economic Profit is therefore,

= 1,260 - 1,022

= $238