Suppose a firm produces 20 units of output at this level of...

Suppose a firm produces 20 units of output. At this level of output, $ATC = 20$, $P = 50$, $MR = 30$, and $MC = 30$. The firm's economic profit is: O a. $600. O b. $500. O c. $400. O d. $300.

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Transcript

00:01 So here we've got a whole bunch of firm cost questions.

00:03 So i'm going to try to tackle these one at a time.

00:07 We have an average, first of all, we have a firm with an average total cost of seven, an average variable cost of six, and marginal revenue is equal to marginal cost, which is five, and quantity is equal to 60.

00:22 So which of these is true? a, minimizing losses.

00:29 This is correct.

00:33 Right? it is...

00:36 Oh sorry, they're being very tricky here.

00:38 This one is incorrect.

00:39 This firm should actually shut down and produce quantity equals to zero because price is less than the average variable cost.

00:48 Very tricky.

00:49 B, total loss.

00:51 Well, the loss is going to be equal to the difference between price, average total quantity, times q.

00:59 So here, this firm is losing two dollars a unit on 60, and so the loss is 120, not 60.

01:06 So that's wrong.

01:07 C, produce more, is obviously wrong because we already have marginal revenue is equal to marginal cost, and that's the best the firm can do.

01:18 What about d, should shut down.

01:20 Yes, this is the correct, as i argued in a, right, because price is less than average variable cost, it's not worth operating, and e is also wrong because e, maximizing profit, is the same as minimizing loss.

01:35 Okay, six...

Question

Suppose a firm produces 20 units of output. At this level of output, $ATC = 20$, $P = 50$, $MR = 30$, and $MC = 30$. The firm's economic profit is: O a. $600. O b. $500. O c. $400. O d. $300.

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