Final answer:
The total profit for a smartphone company selling smartphones and cases is the difference between total revenue and total cost, analogous to the method used by a perfectly competitive firm like a raspberry farm. The company seeks to maximize profit where sales minus costs are highest. For instance, selling 40 units at $16 each results in a profit of $60, with the highest profits occurring where the gap between total cost and revenue is greatest.
Step-by-step explanation:
The total profit (p) earned by a smartphone company when it sells s smartphones and c cases can be determined by calculating the difference between total revenue and total cost at a given level of output. Like a perfectly competitive firm, the company can maximize its profits by finding the quantity of smartphones and cases sold where this difference is largest. For instance, based on total revenue and total cost curves, a raspberry farm as a perfectly competitive firm assesses the point at which its output provides the highest profit. Using the given information from the raspberry farm example, we can infer that if the firm sells a higher quantity of output, then total revenue will increase, leading to higher profits if costs are managed efficiently.
Referring to the provided example, if the firm sells 40 units at a price of $16, above the average cost of $14.50, it realizes a profit, which is represented by the shaded area above the average cost in a graph. This is because its total revenue ($640) exceeds its total cost ($580), resulting in a profit of $60. The firm would aim to find the output level between 70 and 80, as in the example of raspberry farming, where the profit is at a maximum of $90. Profit maximization occurs where the vertical gap between total revenue and total cost is widest on a graph, indicating the greatest difference in value.