Final answer:
Using the provided economic profit, average total cost, and output information, the current market price for the firm's product in a competitive market is calculated to be $11.
Step-by-step explanation:
The student's question is about determining the current market price for a firm operating in a competitive market, given certain financial parameters. To solve this, we need to use the information provided: the firm is producing 40 units of output, has an average total cost (ATC) of $5, and is earning $240 in economic profit in the short run.
To find the market price (P), we use the formula: P = (Total Revenue - Economic Profit) / Quantity. We know that Economic Profit = Total Revenue - Total Cost, which gives us Total Revenue if we rearrange the formula to Total Revenue = Economic Profit + Total Cost. Since we have the average total cost and the amount of output, we can calculate Total Cost as ATC x Quantity, which is $5 x 40 = $200.
Now we add the Economic Profit to the Total Cost: $240 + $200 = $440. This is the Total Revenue. Finally, we divide the Total Revenue by the Quantity to find the market price: $440 / 40 = $11.