Exhibit 10-11 At the profit-maximizing output level, the firm in Exhibit 10-11 is
A)earning economic profit of $400
B)earning economic profit of $200
C)earning zero economic profit
D)suffering a loss of $200
E)suffering a loss of $400

Question

Exhibit 10-11  At the profit-maximizing output level, the firm in Exhibit 10-11 is
A)earning economic profit of $400 
B)earning economic profit of $200 
C)earning zero economic profit 
D)suffering a loss of $200 
E)suffering a loss of $400

Quizplus · Accepted Answer

At the profit-maximizing output level, the firm is producing where marginal revenue equals marginal cost. From the graph, this occurs at a quantity of 8 units, where the marginal cost curve intersects the marginal revenue curve. At this output level, the price charged to consumers is $300 and the average total cost is $300, resulting in zero economic profit. Therefore, the best choice is C, earning zero economic profit.

Exhibit 10-11 at the Profit-Maximizing Output Level, the Firm