Use the figure below, which shows the linear demand and constant cost conditions facing a firm with a high barrier to entry, to answer Questions .
-The firm will earn economic profit of $______.

Question

Use the figure below, which shows the linear demand and constant cost conditions facing a firm with a high barrier to entry, to answer Questions  . 
-The firm will earn economic profit of $______.

Quizplus · Accepted Answer

The economic profit is the difference between total revenue and total cost, and it is maximized where marginal revenue equals marginal cost. In this case, the profit-maximizing quantity is where MR = MC = $5,000, and the corresponding price is $12,000. At this quantity, the firm's total revenue is $15,000,000 and its total cost is $8,750,000 ($4,000,000 for fixed costs and $4,750,000 for variable costs). Therefore, the economic profit is $6,250,000 ($15,000,000 - $8,750,000).

Use the Figure Below, Which Shows the Linear Demand and Constant