total revenue is 60 x 50 = 3,000
total cost is 50 x 50 = 2,500
profit is 3,000 - 2,500 = 500
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1. Consider the firm whose cost and demand data are graphed to the right. If this firm were to produce the allocatively efficient level of output it would:
The firm is producing the allocatively efficient level of output when it sells where Price = Marginal Cost. This occurs where Demand and Marginal Cost are equal. For this firm that means it charges a price of 60 and sells 50 units. At that level of output, Average Total Cost is equal to 50, so:
total revenue is 60 x 50 = 3,000
total cost is 50 x 50 = 2,500
profit is 3,000 - 2,500 = 500
Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved