Scenario 14-2
Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
-Refer to Scenario 14-2. At Q = 999, the firm's profits equal
A)$4,990.
B)$5,000.
C)$5,020.
D)$5,030.

Question

Quizplus · Accepted Answer

At Q = 999, the firm's profit is calculated as (Price - Average Total Cost) * Quantity. So, ($30 - $25) * 999 = $4,995. However, since the marginal cost of producing the 1,000th unit is $20, the profit at Q = 999 is $4,990, as the cost saved by not producing the last unit is $20.

Scenario 14-2 Assume a Certain Firm Is Producing Q = 1,000 Units