A firm is producing 100 units, which is its profit- maximising quantity. The price is $3, the total fixed costs are $40 and the average variable cost for each unit is $1.20. The firm's opportunity costs of being in business are included in both the fixed and variable costs. The firm's supernormal profit is:
A) $140
B) $0
C) - $60
D) $180

Question

Quizplus · Accepted Answer

The firm's total revenue is 100 units * $3 = $300. Total variable cost is 100 units * $1.20 = $120. Total cost is $40 (fixed) + $120 (variable) = $160. Supernormal profit is total revenue - total cost = $300 - $160 = $140.

A Firm Is Producing 100 Units, Which Is Its Profit-