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7 December, 03:19

Quickie Inc., a perfectly competitive firm, currently maximizes profit by producing 400 units of output. If its marginal cost is equal to $25 and its average total cost is $20, then how much is it earning in economic profit?

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  1. 7 December, 04:15
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    economic profit = $2000

    Explanation:

    given data

    currently maximizes profit = 400 units

    marginal cost = $25

    average total cost = $20

    to find out

    earning economic profit

    solution

    first we get here Total revenues that is express as

    Total revenues = currently maximizes profit * marginal cost

    Total revenues = 400 * $25

    Total revenues = $10000

    and Total cost will be

    Total cost = currently maximizes profit * average cost

    Total cost = 400 * $20

    Total cost = $8000

    so economic profit will be

    economic profit = Total revenues - Total cost

    economic profit = $10,000 - $8,000

    economic profit = $2000
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