Assume a purely competitive firm is selling 200 units of output at $3 each. At this output, its total fixed cost is $100 and its total variable cost is $350. This firm is incurring losses. is maximizing its profit. is making a profit, but not necessarily the maximum profit. should shut down in the short run.

Question

Hillary Daniel

Business

29 September, 01:56

Assume a purely competitive firm is selling 200 units of output at $3 each. At this output, its total fixed cost is $100 and its total variable cost is $350. This firm is incurring losses. is maximizing its profit. is making a profit, but not necessarily the maximum profit. should shut down in the short run.

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Answers (1)

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Heath · Answer 1

correct option is maximizing its profit

Explanation:

given data

firm is selling = 200 units

output = $3 each

fixed cost = $100

variable cost = $350

solution

we get here Total average cost that is

Total average cost = variable cost + fixed cost ... 1

put here value

Total average cost = 350 + 100

Total average cost = $450

and

Cost per unit will be

Cost per unit = average cost : no of units ... 2

Cost per unit = 450 : 200

Cost per unit = $2.25

so here firm is incurring per units is $2.25 but here earning per unit is $3.

so that here firm is earning economic profit

as here market price is greater than earning maximum profit

so correct option is maximizing its profit