When Acme Dynamite produces 250 units of output, its variable cost is $2,000, and its fixed cost is $500. It sells each unit of output for $25. When Acme Dynamite produces 250 units of output, its profit is:
A)$6,250.
B)$5,750.
C)$4,250.
D)$3,750.

Question

Quizplus · Accepted Answer

Profit equals total revenue minus total cost. Here, TR = P ×Q = 250 × $25 = $6,250, and TC = TVC + TFC = $2000 + $500 = $2,500, so profit is $6,250 − $2,500 = $3,750.

When Acme Dynamite Produces 250 Units of Output, Its Variable