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    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 Preview

    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 ...

    Solution Summary

    A profit-maximizing firm is contemplated in this solution.