Question

Which of the following tells us the profit per unit?

a. (π/Q) = P - ATC
b. Profit per Unit = Price - Average Total Cost
c. Profit per unit = Price + Average Total Cost
d. (π/Q) = P + ATC

Answer 1

The correct equation that tells us the profit per unit is Profit per Unit = Price - Average Total Cost (b). By subtracting the average total cost from the price, we can determine the profit made per unit.

Step-by-step explanation:

The correct equation that tells us the profit per unit is Profit per Unit = Price - Average Total Cost (b).

By subtracting the average total cost from the price, we can determine the profit made per unit. If the price is less than the average total cost, the firm is experiencing losses. The difference between the price and the average total cost represents the profit or loss per unit.

For example, if the average total cost is $26/unit and the price is $25/unit, then the firm is losing $1 for each unit produced.