Question
To calculate the firm's economic profit, we need to determine the total revenue (TR), total cost (TC), and then find the difference between them. Total
To calculate the firm's economic profit, we need to determine the total revenue (TR), total cost (TC), and then find the difference between them.
Total Revenue (TR): Total revenue is calculated as price (P) multiplied by quantity (Q).
=TR=PQ
From the previous answers, we have =70P=70 and =3000Q=3000.
=703000=210,000TR=703000=210,000
Total Cost (TC): Total cost is calculated as average total cost (ATC) multiplied by quantity (Q). Given that ATC is constant at $40:
=TC=ATCQ
=403000=120,000TC=403000=120,000
Economic Profit: Economic profit is the difference between total revenue and total cost.
EconomicProfit=EconomicProfit=TRTC
EconomicProfit=210,000120,000=90,000EconomicProfit=210,000120,000=90,000
Therefore, the firm's economic profit at the current quantity traded is $90,000.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started