Question

Assume a perfectly competitive firm is producing 300 units of output, P = $10, ATC of the 300th unit is $8, marginal cost of the 300th unit = $10, and AVC of the 300th unit = $6. Based on this information, the firm is:

earning an economic profit of $600.

earning an economic profit of $1,200.

incurring a loss of $600.

incurring a loss of $1,200.

Answer 1

Earning an economic profit of $600.

Step-by-step explanation:

Given that,

Firm is producing 300 units of output, P = $10

ATC of the 300th unit = $8

Marginal cost of the 300th unit = $10

AVC of the 300th unit = $6

Using the given information,

Economic profit = (P - ATC) × Q

Profit = (10 - 8) × 300

Profit = (2) × 300

Profit = $600

Earning an economic profit of $600.