Question

Quickie Inc., a perfectly competitive firm, currently maximizes profit by producing 400 units of output. If its marginal cost is equal to $25 and its average total cost is $20, then how much is it earning in economic profit?

Answer 1

Answer:

economic profit = $2000

Explanation:

given data

currently maximizes profit = 400 units

marginal cost = $25

average total cost = $20

to find out

earning economic profit

solution

first we get here Total revenues that is express as

Total revenues = currently maximizes profit  × marginal cost

Total revenues =  400 ×  $25

Total revenues = $10000

and Total cost will be

Total cost = currently maximizes profit  × average cost

Total cost = 400  ×  $20

Total cost = $8000

so economic profit will be

economic profit = Total revenues - Total cost

economic profit = $10,000 - $8,000

economic profit = $2000