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A profit-maximizing firm in a competitive market is currently producing 200 units of output. It has...

A profit-maximizing firm in a competitive market is currently producing 200 units of output. It has a marginal cost of $15, the average total cost of $10, and a fixed cost of $200 (a) What is its profit? (b) What is its average revenue? (c) What is its average variable cost?

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Expert Solution

A profit maximizing firms sets it price = marginal cost

Thus price = 15

Total cost = Average total cost * quantity = 10*200 = 2000

total revenue = price*quantity = 15*200 = 3000

(a) Thus, total profits = revnue - cost = 3000 - 2000 = $1000

(b) average revenue = total revenue / quantity = 3000/200 = $5

(c) Total Variable cost = total cost - fixed cost = 2000 - 200 = 1800

Average Variable cost = total variable cost / quantity = 1800/ 200 = $9

Rahul Sunny answered 2 years ago
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