Marginal revenue equals marginal cost at an output of 20 units. At this output, marginal revenue equals $20, average variable cost equals $15, and average total cost equals $25. In the short run, a profit-maximizing firm will earn a profit of
A) -$200.
B) -$100.
C) $200.
D) $400.

Question

Quizplus · Accepted Answer

Profit is calculated as (Price - Average Total Cost) * Quantity. Here, Price (or Marginal Revenue) is $20, Average Total Cost is $25, and Quantity is 20 units. Thus, Profit = ($20 - $25) * 20 = -$100.

Marginal Revenue Equals Marginal Cost at an Output of 20