Question

Wenqin is a farmer, and in the short run she produces 100 bushels of wheat. Her average total cost per bushel is $1.75, total revenue is $450, and total fixed costs are $100. Wenqin's: Select one:
a. average fixed cost is $1.50.
b. economic profit is $250.
c. profit per bushel is $2.75.
d. average variable cost is $1.25.

Answer 1

Answer:

c. profit per bushel is $2.75.

Explanation:

Let's calculate all of the parameters presented in the alternatives and compare to the real values:

Units sold = 100

Total cost per unit = $1.75

Total revenue = $450

Total fixed costs = $100

Average fixed cost = $100/100 = $1.00

Economic profit = $450 - ($1.75*100) = $275

Profit per bushel = $275/100 = $2.75

Average variable cost = $1.75 -$1.00 = $0.75

Therefore, the only alternative that presents correct values is c. profit per bushel is $2.75