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Suppose a firm’s total cost curve is TC = 10q² - 6q + 60, and MC = 20q - 6.

User Miselking
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1 Answer

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Final answer:

At a quantity of 40, the firm's total revenue is $640 and its total cost is $580, so profits are $60.

Step-by-step explanation:

Once the firm has chosen price and quantity, it's in a position to calculate total revenue, total cost, and profit.

At a quantity of 40, the price of $16 lies above the average cost curve, so the firm is making economic profits.

From Table 10.1 we can see that, at an output of 40, the firm's total revenue is $640 and its total cost is $580, so profits are $60. In Figure 10.3, the firm's total revenues are the rectangle with the quantity of 40 on the horizontal axis and the price of $16 on the vertical axis.

The firm's total costs are the light shaded rectangle with the same quantity of 40 on the horizontal axis but the average cost of $14.50 on the vertical axis. Profits are total revenues minus total costs, which is the shaded area above the average cost curve.

User Max Carroll
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