Table 12-1

Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 12-1.If the market price of each camera case is $8 and the firm maximizes profit, what is the amount of the firm's profit or loss?
A)$0 (it breaks even)
B)loss of $1,000
C)profit of $440
D)loss of $440

Question

Table 12-1
  
Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 12-1.If the market price of each camera case is $8 and the firm maximizes profit, what is the amount of the firm's profit or loss?
A)$0 (it breaks even) 
B)loss of $1,000 
C)profit of $440 
D)loss of $440

Quizplus · Accepted Answer

To find the profit or loss, we need to find the total revenue and total cost first. As the market price is $8, the total revenue for each batch of 100 units would be 100 x $8 = $800.
To find the total cost, we need to refer to Table 12-1. At an output level of 100 units, the total cost is $360. At an output level of 200 units, the total cost is $470 (which includes the fixed cost of $110). Therefore, the cost per batch of 100 units is $470 - $360 = $110.
Now, for each batch of 100 units, the firm makes a profit of $800 - $110 = $690.
Hence, the firm's total profit for producing 6 batches of 100 units each would be 6 x $690 = $4,140.
Therefore, the answer is C, profit of $440.

Table 12-1 Table 12-1 Shows the Short-Run Cost Data of a Perfectly