Question

Suppose a perfectly competitive ukulele factory can produce 35 ukuleles at an output at which marginal cost equals marginal revenue. The price per ukulele is $1300 and the average total cost is $1500. What is the profit or loss that this furniture factory is earning?

Answer 1

Answer: There is loss of $7000 that this furniture factory is earning.

Step-by-step explanation:

Since we have given that

Average total cost = $1500

Price per ukulele = $1300

As we know that

$ATC=\dfrac{Total\ cost}{No.\ of.\ units}\\\\1500=\dfrac{TC}{35}\\\\1500\times 35=TC\\\\52,500=TC$

Number of units = 35

So, total revenue would be

$Price\times quantity\\\\=1300\times 35\\\\=\ 45500$

So,  Loss is given by

Total cost - Total revenue

$52500-45500\\\\=7000$

Hence, there is loss of $7000 that this furniture factory is earning.