profit-maximizing firm
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A profit-maximizing firm in a competitive market is currently producing 1000 units of output. It has average revenue of $10, average total cost of $8, and fixed costs of $200.
a. What is profit?
b. What is marginal cost?
c. What is variable cost?
d. If you are operating a business in a perfect competitive market, why would it be difficult to lower or increase price?
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Solution Summary
A profit-maximizing firm is contemplated in this solution.
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a. profit is
Total Revenue: 1000*10 = 10,000 (output * average revenue)
Total costs: 10000*8 = 8,000 (output * ATC)
profit = TR - TC = 2,000.
b. We can't know. We only have information about the ATC and ...
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