Question

In: Economics

Given a perfectly competitive market structure at the profit-maximizing output level, a firm’s total fixed cost...

Given a perfectly competitive market structure at the profit-maximizing output level, a firm’s total fixed cost is $32, total variable cost is $174, marginal revenue is $6.60, and the quantity demanded is 38 units. Calculate the firm's profit at the profit-maximizing output level. Show your work. Show your work.

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Solutions

Expert Solution

At the profit-maximizing output level, the total fixed and variables costs of the firm are $32 and $174 respectively. Therefore, the total cost incurred by the firm at the profit-maximizing level in the market=($32+$174)=$206.

The marginal revenue obtained by the firm by selling each unit of output at the profit-maximizing level is $6.60 and the quantity demanded is given as 38 units. Hence, the total revenue obtained by the firm at the profit-maximizing level=(38 units*$6.60)=$250.8. Thus, the total profit of the firm at the profit-maximizing level=($250.8-$206)=$44.8


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