A perfectly competitive firm is selling a product at the market price of $30

Economics Jan 16, 2021

A perfectly competitive firm is selling a product at the market price of $30. It produces and sells the profit-maximizing quantity of 60 units, and at this level of output, its average total cost is $20 and its average variable cost is $8. What is the firm's level of profit?

Expert Solution

Computation of Firm's Level of Profit:

Profit = Total Revenue - Total Cost

Here,

Total Revenue = Quantity * Market Price = 60 units*$30 = $1,800

Total Cost = Quantity*Average Total Cost = 60 units * $20 = $1,200

Profit = $1,800 - $1,200 = $600

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