Question

A perfectly competitive firm is producing 700 units, which is their profit-maximizing output level. The market price for their good is $2 and the firm's average total cost to produce the 700 units is $0.50. What is their profit or loss from producing the 700 units

Answer 1

Their profit or loss from producing the 700 units is: $1,050.

Profit or loss

Using this formula

Profit or loss=(Number of units×Market price)-(Number of units×Average total cost)

Let plug in the formula

Profit or loss=(700 units×$2)-(700 units×$0.50)

Profit or loss=$1,400-$350

Profit or loss=$1,050

Therefore their profit or loss from producing the 700 units is: $1,050.

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