Question

Suppose a perfectly competitive ukulele factory can produce 35 ukuleles at an output at which marginal cost equals marginal revenue. The price per ukulele is $1300 and the average total cost is $1500. What is the profit or loss that this furniture factory is earning?

Answer 1

Answer: There is loss of $7000 that this furniture factory is earning.

Explanation:

Since we have given that

Average total cost = $1500

Price per ukulele = $1300

As we know that

`ATC=(Total\ cost)/(No.\ of.\ units)\\\\1500=(TC)/(35)\\\\1500* 35=TC\\\\52,500=TC`

Number of units = 35

So, total revenue would be

`Price* quantity\\\\=1300* 35\\\\=\$45500`

So, Loss is given by

Total cost - Total revenue

`52500-45500\\\\=7000`

Hence, there is loss of $7000 that this furniture factory is earning.