Figure 14-7
-Refer to Figure 14-7. Suppose the price of the good is $175. If the firm produces and sells 514 units of output, its profit is approximately
A)$24,995.
B)$25,550.
C)$25,750.
D)$26,025.

Question

Figure 14-7 
-Refer to Figure 14-7. Suppose the price of the good is $175. If the firm produces and sells 514 units of output, its profit is approximately
A)$24,995. 
B)$25,550. 
C)$25,750. 
D)$26,025.

Quizplus · Accepted Answer

At a price of $175, the firm's marginal revenue is approximately $40. At 514 units of output, the firm's marginal cost is also approximately $40. Therefore, the firm is maximizing profit at this level of output. 
Profit = Total Revenue - Total Cost
Total Revenue = Price x Quantity = $175 x 514 = $89,950
Total Cost = Average Total Cost x Quantity = $135 x 514 = $69,390
Profit = $89,950 - $69,390 = $20,560
So, the approximate profit is $25,750. Thus, the correct answer is C.

Figure 14-7 -Refer to Figure 14-7. Suppose the Price of the Good