Suppose product price is fixed at $24; MR = MC at Q = 200; AFC =...
Suppose product price is fixed at $24; MR = MC at Q = 200; AFC = $6; AVC = $16. What do you advise this firm to do?
| a. |
Decrease output. |
|
| b. |
Stay at the current output; the firm is losing $200. |
|
| c. |
Increase output. |
|
| d. |
Stay at the current output; the firm is earning a profit of $400. |
Homework Answers
Answer
Option d
|
Stay at the current output; the firm is earning a profit of $400 |
ATC=AFC+AVC=6+16=22
P=24
Q=200
Profit=(P-ATC)*Q=(24-22)*200=$400
the firm makes a profit of $400
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