Suppose that at 500 units of output, the marginal revenue is equal to marginal cost. The...

Suppose that at 500 units of output, the marginal revenue is equal to marginal cost. The firm is selling its output at $10 per unit and average total cost at 500 units of output is $6. On the basis of this information, we:

can say that the firm should close down in the short run.

can assume the firm is not using the most efficient technology.

can say that the firm can produce and realize an economic profit in the short run.

cannot determine whether the firm should produce or shut down in the short run.

Solutions

Expert Solution

The firm is profit maximizing and earning a positive economic profit. The profit is the difference between the total revenue and total cost.

We can calculate the total revenue by price multiplied by quantity demanded.

Profit

So the firm is earning the economic profits.

Ans: can say that the firm can produce and realize an economic profit in the short run.

Rahul Sunny answered 1 year ago

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