Question

Given a perfectly competitive market structure, a firm's total fixed costs are $195, average variable costs are $4, marginal revenue is $6, and the quantity demanded is 65. Assuming the firm is a profit maximizer, what are the firm's total profits

Answer 1

Answer: -$65

Explanation:

The following can be deuced from the question:

Revenue: $6 × $65 = $390

Less: Variable cost = $4 × $65 = $260.

Contribution = $390 - $260 = $130

Less: fixed cost = $195

Firms profit/loss will be:

= $130 - $195

= -$65

The firm is making a loss of $65.