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Question
Microeconomics
Posted about 2 months ago

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-\$ 284,000
(B) $0\$ 0
(c) $75,000\$ 75,000
(D) $124,000-\$ 124,000
(E) $600,000-\$ 600,000
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Answer from Sia
Posted about 2 months ago
Solution
a
Identify the profit-maximizing quantity: The firm maximizes profit where MC=MRMC = 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×Q=30×8=240TR = P \times Q = 30 \times 8 = 240
d
Determine average total cost (ATC) at the profit-maximizing quantity: From the graph, at quantity 8, ATC=101ATC = 101
e
Calculate total cost (TC): TC=ATC×Q=101×8=808TC = ATC \times Q = 101 \times 8 = 808
f
Calculate profit: Profit=TRTC=240808=568Profit = TR - TC = 240 - 808 = -568
Answer
568,000-568,000
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.

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