Question

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $4. Its profit is ________

Answer 1

Profit= $1600

The profit which firm is generating is $1600.

Step-by-step explanation:

Formula:

Profit= Total Selling Cost- Total Actual Cost

Profit= (Price at which unit is sold*Number of units) - (Average cost*Number of units)

In our case:

Number of units=800 units

Price= $6

Average cost= $4

Profit= ($6*800) - ($4*800)

Profit= ($4800) - ($3200)

Profit= $1600

The profit which firm is generating is $1600.