Question

Suppose a perfectly competitive broccoli farm can produce 35 crates at an output level where marginal revenue equals marginal cost. the price per crate of broccoli is $25 and the average total cost is $30. what is the total profit or loss that this farm is earning

Answer 1

Note: if a perfectly competitive firm's price is less than the average total cost they are incurring a loss.

To find the total loss the broccoli farm is incurring:
price per crate of broccoli $25
average cost: $30
crates: $35

First, multiply the price per crate or broccoli $25 by the 35 crates = $875
Next, multiply the average cost of $30 by the 35 crates = $1,050
Then, subtract the two $875 - $1,050 = -$175