This graph shows the cost curves and marginal revenue curves for a firm.

How much is this firm's short-run profit?

Choose 1 answer:
(A) $-\$ 284,000$
(B) $\$ 0$
(c) $\$ 75,000$
(D) $-\$ 124,000$
(E) $-\$ 600,000$

Question

This graph shows the cost curves and marginal revenue curves for a firm.

How much is this firm's short-run profit?

Choose 1 answer:
(A) $-\$ 284,000$
(B) $\$ 0$
(c) $\$ 75,000$
(D) $-\$ 124,000$
(E) $-\$ 600,000$

Accepted Answer

∻Solution∻ ‖ a ⋮ Identify the profit-maximizing quantity: The firm maximizes profit where $MC = MR$. From the graph, this occurs at the intersection point (8, 30). ‖ ‖ b ⋮ Determine the price and quantity: At the profit-maximizing quantity (8), the price is $30. ‖ ‖ c ⋮ Calculate total revenue (TR): $TR = P imes Q = 30 imes 8 = 240$. ‖ ‖ d ⋮ Determine average total cost (ATC) at the profit-maximizing quantity: From the graph, at quantity 8, $ATC = 101$. ‖ ‖ e ⋮ Calculate total cost (TC): $TC = ATC imes Q = 101 imes 8 = 808$. ‖ ‖ f ⋮ Calculate profit: $Profit = TR - TC = 240 - 808 = -568$. ‖ ∻Answer∻ ⚹ $-568,000$ ⚹ ∻Key Concept∻ ⚹ Short-run profit calculation ⚹ ∻Explanation∻ ⚹ The firm's short-run profit is determined by subtracting total cost from total revenue at the profit-maximizing quantity. In this case, the firm incurs a loss of $568,000. ⚹◊What is the formula for calculating short-run profit in Microeconomics?⍭ Generate me a similar question◊

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