Question

Suppose a firm produces 20 units of output. At this level of output, ATC = 35, P = 50, MR = 30, and MC = 30. The firm's economic profit is:

$1,000.
$600.
$700.
$300.

Answer 1

The firm's economic profit is calculated by subtracting the total cost from the total revenue. With a price of $50 per unit for 20 units, the total revenue is $1000. With an ATC of $35, the total cost is $700, resulting in an economic profit of $300.

Step-by-step explanation:

To determine the firm's economic profit, we can calculate the difference between the total revenue (TR) and total cost (TC), which is the product of average total cost (ATC) and quantity (Q). Given that the price (P) is $50 per unit, and the firm produces 20 units of output, its total revenue is $50 × 20, or $1000. The average total cost (ATC) is $35, so the total cost is $35 × 20, or $700. Therefore, the economic profit is total revenue minus total cost: $1000 - $700 = $300.