Table 7.1
$$\begin{array} { | c | c | c | }
\hline \text { Quantity } & \begin{array} { c }
\text { Total Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c }
\text { Variable Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 1000 & \$ 0 \
\hline 100 & 1360 & 360 \
\hline 200 & 1560 & 560 \
\hline 300 & 1960 & 960 \
\hline 400 & 2760 & 1760 \
\hline 500 & 4000 & 3000 \
\hline 600 & 5800 & 4800 \
\hline
\end{array}$$ Table 7.1 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 7.1.If the market price of each camera case is $8 and the firm maximises profit,what is the amount of the firm's profit or loss?
A) $0 (it breaks even)
B) Loss of $1000
C) Profit of $440
D) Loss of $440

Question

Table 7.1
 $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Variable Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 1000 & \$ 0 \
\hline 100 & 1360 & 360 \
\hline 200 & 1560 & 560 \
\hline 300 & 1960 & 960 \
\hline 400 & 2760 & 1760 \
\hline 500 & 4000 & 3000 \
\hline 600 & 5800 & 4800 \
\hline
\end{array}$$ Table 7.1 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 7.1.If the market price of each camera case is $8 and the firm maximises profit,what is the amount of the firm's profit or loss?
A) $0 (it breaks even)
B) Loss of $1000
C) Profit of $440
D) Loss of $440

Quizplus · Accepted Answer

To determine the firm's profit or loss, we need to find the level of output where MC=MR, which is at 500 units in this case. At this level, the ATC is $8.80 (found by dividing total cost by output) and the firm's total revenue is $4,000 (500 units x $8). Therefore, the firm's profit is:
Total revenue - Total cost = $4,000 - $4,440 = -$440
This means the firm is making a loss of $440. Therefore, the best choice is (D) Loss of $440.

Table 71 Table 71 Shows the Short-Run Cost Data of a Perfectly Competitive