If a monopolistically competitive firm is producing 450 units of output and at this output level, the price is $15, and the average total cost is $12, the firm profit/loss is equal to: A

Accounting Dec 08, 2020

If a monopolistically competitive firm is producing 450 units of output and at this output level, the price is $15, and the average total cost is $12, the firm profit/loss is equal to:

A. $1,350

B. -$1,525

C. -$1,350

D. $1,525

Expert Solution

\The answer is A. $1,350.$1,350.

The equation is

π=(P−ATC)⋅Qπ=(P−ATC)⋅Q

Where:π=profitP=PriceATC=Average Total CostQ=QuantittyWhere:π=profitP=PriceATC=Average Total CostQ=Quantitty

Substituting values:

π=($15−$12)⋅450=$1,350

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