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2 August, 04:35

Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits. If the price of memory cards is $9, if Mikail's output is 3,000 cards a month, and if his monthly average total cost is $7, what are his monthly profits? $27,000 $6,000 $21,000 $2

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  1. 2 August, 04:39
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    B. $6000

    Explanation:

    Given that

    Price = $9

    Average total cost (ATC) = $7

    Output (Q) = 3000

    Two methods can be used in calculating profit in this case.

    The first method is

    Profit = (price - ATC) * Q

    = (9 - 7) * 3000

    = 2 * 3000

    = $ 6000

    The second method is

    Profit = Total revenue (TR) - Total Cost (TC)

    Where TR = Price * Q = 9 * 3000 = $27000

    TC = ATC * Q = 7 * 3000 = $ 21000

    Therefore,

    Profit = 27000 - 21000

    = $6000

    Any method used will result to the same answer.

    NOTE THAT,

    ATC = Total cost / Q.

    So change of formula was used to obtain Total cost from this formula.
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