Question

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

Answer 1

$0

Step-by-step explanation:

The computation of the value of firm profit is shown below:

As we know that

Profit = Total revenue - Total cost

where,

Total revenue is

= 10 widgets × $15

= $150

And,

Total cost = Variable cost + Fixed cost

= 10 widgets × $13 + $20

= $130 + $20

= $150

So, the profit is

= $150 - $150

= $0

Hence the firm is in break-even point where there is no profit or no loss