Chapter 58, Problem 5MCQ

To determine

The firm’s profit.

Answer to Problem 5MCQ

Option c is correct.

Explanation of Solution

Given Information:

Price per product is $5

Number of units produced is 500

Total cost is $1000

Explanation for correct option:

c.

Profit earned by the firm can be determined by using following formula:

  $\begin{array}{c}\text{Total revenue}=\text{Price}\times \text{Output}\\ \text{=\$5}\times \text{500}\\ \text{\$2500}\end{array}$

  $\begin{array}{c}\text{Profit}=\text{TR}-\text{TC}\\ \text{=\$2500}-\$1000\\ =\$1500\end{array}$

Therefore, option c is correct.

Explanation for incorrect options:

Since, it is calculation based, other options are incorrect.

Economics Concept Introduction

Perfect Competition: In perfect competition, firms are the price takers where average total cost (ATC) is minimum to the point at which MC curve cuts the MR curve.