Equilibrium price is $19 in a perfectly competitive market. For a perfectly competitive firm, MR = MC at 120 units of output. At 120 units, ATC is $11, and AVC is $8. The best policy for this firm is to __________ in the short run. Also, this firm earns __________ of __________ if it produces and sells 120 units. Finally, the difference between total revenue and total fixed cost for this firm is __________.

Question

Quizplus · Accepted Answer

The firm should continue to produce because the price ($19) is above AVC ($8), covering variable costs. The profit is calculated as (Price - ATC) * Quantity = ($19 - $11) * 120 = $960. Total revenue is $19 * 120 = $2,280, and total fixed cost is (ATC - AVC) * Quantity = ($11 - $8) * 120 = $360. The difference between total revenue and total fixed cost is $2,280 - $360 = $1,920.

Equilibrium Price Is $19 in a Perfectly Competitive Market