Scenario 14-4
The information below applies to a competitive firm that sells its output for $40 per unit.
• When the firm produces and sells 150 units of output, its average total cost is $24.50.
• When the firm produces and sells 151 units of output, its average total cost is $24.55.
-Refer to Scenario 14-4. When the firm produces 150 units of output, its profit is
A)$2,150.00.
B)$2,325.00.
C)$3,100.75.
D)$3,675.00.

Question

Quizplus · Accepted Answer

To calculate the profit when the firm produces 150 units of output, we need to find the firm's total cost and total revenue.
Total cost = Average total cost x Quantity produced
Total cost = $24.50 x 150 = $3,675.00

Total revenue = Price per unit x Quantity Produced
Total revenue = $40 x 150 = $6,000.00

Profit = Total revenue - Total cost
Profit = $6,000.00 - $3,675.00 = $2,325.00

Therefore, the best choice is option B as it gives the correct profit earned by the firm when it produces and sells 150 units of output.

Scenario 14-4 The Information Below Applies to a Competitive Firm That Sells