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Brenda's Family Photos is a photographic portrait business in a perfectly competitive market in Duluth
Brenda's Family Photos is a photographic portrait business in a perfectly competitive market in Duluth. The market price of a portrait is $35.
The Table shows Brenda's total costs.
| Quantity (portraits per hour) | Total Cost (dollars per hour) |
|---|---|
| 0 | 50 |
| 1 | 90 |
| 2 | 120 |
| 3 | 140 |
| 4 | 170 |
| 5 | 210 |
| 6 | 270 |
a. How many portraits does Brenda sell in an hour?
b. What is Brenda's economic profit in the short run?
Expert Solution
| Quantity (portraits per hour) |
Total Cost (dollars per hour) |
Marginal Cost (dollars per hour) |
Total Revenue (dollars per hour) |
Profit (dollars per hour) |
|---|---|---|---|---|
| 0 | 50 | - | 0 | -50 |
| 1 | 90 | 40 | 35 | -55 |
| 2 | 120 | 30 | 70 | -50 |
| 3 | 140 | 20 | 105 | -35 |
| 4 | 170 | 30 | 140 | -30 |
| 5 | 210 | 40 | 175 | -35 |
| 6 | 270 | 50 | 210 | -50 |
A: 4
Shown above is the table given but with the marginal cost, total revenue and profit. Marginal cost is last below price at quantity of 4 portraits and thus, the business will produce a quantity of 4 portraits per hour to maximize profit.
B: - $30
Economic profits in the short-run will be -$30 as shown in the table which is a loss but the firm is better off operating at 4 units with a loss of $30 than none and a loss of $50 for the fixed cost.
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