Question

. Consider a firm operating in a competitive market. The firm is producing 40 units of output, has an average total cost of production equal to $5, and is earning $240 economic profit in the short run. What is the current market price? a. $10 b. $12 c. $9 d. $11

Answer 1

Answer:

The current market price is $11

Explanation:

Profit =Sales -cost

Sales=Price x units  

Cost = cost of production x units

Profit =Price x units  -cost of production x units

We want to know the current market price

Price= (Profit+ cost of production x units )/units

Price= ($240+$5 x 40 )/40

Price= ($240+$200 )/40

Price= $440/40

Price= $440/40= $11