Question

A firm produces 10 calculators that they sell for $15 each. The average variable cost for the production of 10 calculators is $13/unit. The fixed costs for this firm equal $20. What is the value of this firm's profits

Answer 1

The correct answer is $0.

Step-by-step explanation:

According to the scenario, the given data are as follows:

Number of calculator = 10

Sell price = $15 per calculator

So, total revenue = 10 × $15 = $150

Now variable cost = $13 per unit

So, total variable cost = $13 × 10 = $130

Fixed cost = $20

So, Total cost = Variable cost + fixed cost

= $130 + $20 = $150

So, we can calculate the firm profit by using following formula:

Firm's profit = Total revenue - total cost

= $150 - $150

= $0