Question

Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. What is the economic profit of this corporation?

Answer 1

Answer:

Economic profit  = $40

Explanation:

given data

producing = 20 units

selling = $10 per unit

total fixed costs = $100

average variable cost = $3

output = 20 units

to find out

economic profit of this corporation

solution

we get here revenue that is express as

revenue = 20 units × $10

revenue = $200

and

now we get variable cost is here as

variable cost = 20 units × $3

variable cost = $60

and

now we get here total cost that is express as

total cost = Fixed cost + Variable cost     .............1

total cost = $100 + $60

total cost = $160

so now Economic profit will be

Economic profit =  Revenue - Total cost    ......................2

Economic profit = $200 - $160

Economic profit  = $40