A profit-maximizing firm in a competitive market is able to sell its product for $9. At...

A profit-maximizing firm in a competitive market is able to sell its product for $9. At its current level of output, the firm's average total cost is $10. The firm's marginal cost is the same as its marginal revenue at its current output level of 20 units. The firm experiences a

Select one: a. loss of more than $20.

b. profit of more than $20.

c. profit of exactly $20.

d. loss of exactly $20.

Solutions

Expert Solution

Total cost of the firm in the market is $10 x 20 = $200.

Total revenue of the firms = $9 x 20 = 180. As the price and the marginal cost is same in a perfectly competitive market the firms is selling 20 units at the price of 9.

There is a loss of $20 in the market. the answer is "D".

Rahul Sunny answered 1 year ago

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