-Bill owns a lawn-care company in Bendigo, whose cost curves are illustrated in the above figure. The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed. If Bill's average total cost curve is ATC, his total economic ________ equals ________.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms maximize profit where the market price equals marginal cost (MC). The difference between the market price and the average total cost (ATC) at this quantity, multiplied by the quantity, gives the total economic profit. If the ATC is below the market price at the profit-maximizing quantity, the firm makes a profit. Without the specific figures from the graph, we can't calculate the exact numbers, but the principle holds that if the market price is above ATC, the firm is profitable.

-Bill Owns a Lawn-Care Company in Bendigo, Whose Cost Curves