Table 7.4
$$\begin{array} { | c | c | c | c | }
\hline \text { Quantity } & \begin{array} { c }
\text { Average } \
\text { Fixed Cost }
\end{array} & \begin{array} { c }
\text { Average } \
\text { Variable Cost }
\end{array} & \begin{array} { c }
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 20 & \$ 40 & \$ 18 & \$ 18 \
\hline 40 & 20 & 14 & 10 \
\hline 60 & 13.1 & 16 & 20 \
\hline 80 & 10 & 22 & 40 \
\hline 100 & 8 & 30 & 62 \
\hline 120 & 6.61 & 40 & 90 \
\hline
\end{array}$$ Table 7.4 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units.
-Refer to Table 7.4.If the market price is $45,the firm
A) will earn a profit of $3600.
B) will suffer a loss of $200.
C) will break even.
D) will earn profit of $1040.

Question

Table 7.4
 $$\begin{array} { | c | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Average } \
\text { Fixed Cost }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Variable Cost }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 20 & \$ 40 & \$ 18 & \$ 18 \
\hline 40 & 20 & 14 & 10 \
\hline 60 & 13.1 & 16 & 20 \
\hline 80 & 10 & 22 & 40 \
\hline 100 & 8 & 30 & 62 \
\hline 120 & 6.61 & 40 & 90 \
\hline
\end{array}$$ Table 7.4 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units.
-Refer to Table 7.4.If the market price is $45,the firm
A) will earn a profit of $3600.
B) will suffer a loss of $200.
C) will break even.
D) will earn profit of $1040.

Quizplus · Accepted Answer

At a market price of $45, the firm will produce 80 units where the price is greater than the average total cost (ATC = AFC + AVC = $10 + $22 = $32), leading to a profit. Profit = (Price - ATC) * Quantity = ($45 - $32) * 80 = $1040.

Table 74 Table 74 Shows the Short-Run Cost Data of a Perfectly Competitive