Consider the following diagram where a perfectly competitive firm faces a price of $40. Figure 8.1
-Refer to Figure 8.1. At the profit-maximizing level of output, total profit is

Question

Consider the following diagram where a perfectly competitive firm faces a price of $40.  Figure 8.1
-Refer to Figure 8.1. At the profit-maximizing level of output, total profit is

Quizplus · Accepted Answer

The profit-maximizing level of output occurs at the quantity where MR=MC, which is Q=9. At this level of output, the ATC is $37, which means the firm's profit per unit is $3. Therefore, the total profit at Q=9 is: 
Total Profit = ($40 - $37) x 9 = $27 x 9 = $243 
However, since the firm incurs a fixed cost of $600 regardless of the level of output, the total profit is: 
Total Profit = $243 - $600 = -$357 
Therefore, the correct answer is E) $603, which represents the firm's total revenue of $360 and fixed cost of $600.

Consider the Following Diagram Where a Perfectly Competitive Firm Faces