Question

Which of the following is an expression of profit for a perfectly competitive​ firm? Profit for a perfectly competitive firm can be expressed as;
(a) Profitequals=(Upper P times Upper Q )minus (TC times Upper Q )(P×Q)−(TC×Q)​, where P is​ price, Q is​ output, and TC is total cost.
(b) Profitequals=Pminus−​ATC, where P is price and ATC is average total cost.
(c) Profitequals=Ptimes×​Q, where P is price and Q is output.
(d) Profitequals=(Upper P minus ATC )times Upper Q(P−ATC)×Q​, where P is​ price, Q is​ output, and ATC is average total cost.
(e) Profitequals=Pminus−​MC, where P is price and MC is marginal cost.

Answer 1

Answer:

Option (d) is correct.

Explanation:

In a perfectly competitive market, there are large number of buyers and sellers, so price and quantity is determined by the market forces. Firms in a perfectly competitive market can earn abnormal profits, normal profits or losses in the short run and can earn normal profits and losses in the long run.

The profit for these firms is calculated by subtracting the product of average total cost and quantity from the product of price and quantity.

Profit( = (P × Q) - (ATC × Q)