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2) Profit Maximization (. Consider a perfectly competitive market for Widgets. Suppose the market determines a market price of $40 and total quantity of 1,000,000 units per month. At this price the firm finds its profit maximizing quantity is 80 units per month. Average Total Cost is $60 and Average Variable Cost is $45 at this quantity. Is this firm earning economics profits or losses? Calculate fixed costs, should this firm stay open (produce 80 units) or close (produce zero units) in the short run?

2) Profit Maximization (. Consider a perfectly competitive market for Widgets. Suppose the market determines a market price of $40 and total quantity of 1,000,000 units per month. At this price the firm finds its profit maximizing quantity is 80 units per month. Average Total Cost is $60 and Average Variable Cost is $45 at this quantity. Is this firm earning economics profits or losses? Calculate fixed costs, should this firm stay open (produce 80 units) or close (produce zero units) in the short run?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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2) Profit Maximization (. *. Consider a perfectly competitive market for Widgets. Suppose the market determines a market price of $40 and total quantity of 1,000,000 units per month. At this price the firm finds its profit maximizing quantity is 80 units per month. Average Total Cost is $60 and Average Variable Cost is $45 at this quantity. Is this firm earning economics profits or losses? Calculate fixed costs, should this firm stay open (produce 80 units) or close (produce zero units) in the short run?
Transcribed Image Text:2) Profit Maximization (. *. Consider a perfectly competitive market for Widgets. Suppose the market determines a market price of $40 and total quantity of 1,000,000 units per month. At this price the firm finds its profit maximizing quantity is 80 units per month. Average Total Cost is $60 and Average Variable Cost is $45 at this quantity. Is this firm earning economics profits or losses? Calculate fixed costs, should this firm stay open (produce 80 units) or close (produce zero units) in the short run?
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