(Table: Oil Production Costs) Refer to the table. If seven barrels of oil are produced, this firm is making: A) a profit, because P AC. B) a loss, because MC AC. C) a profit, because MR MC. D) a loss, because TR

Question

(Table: Oil Production Costs) Refer to the table. If seven barrels of oil are produced, this firm is making: 
A) a profit, because P >AC. 
B) a loss, because MC > AC. 
C) a profit, because MR > MC. 
D) a loss, because TR < TC.

Quizplus · Accepted Answer

The total cost of producing seven barrels of oil is $590, which means the average cost of producing each barrel is $84.29. The price of one barrel of oil is $100, which is greater than the average cost. Therefore, the firm is making a profit.

(Table: Oil Production Costs) Refer to the Table