Suppose product price is fixed at $24; MR = MC at Q = 200; AFC = $6; AVC = $16. What do you advise this firm to do?
A) Increase output.
B) Decrease output.
C) Stay at the current output; the firm is losing $200.
D) Stay at the current output; the firm is earning a profit of $400.

Question

Quizplus · Accepted Answer

The firm is earning a profit because the price ($24) is equal to the average total cost (AFC + AVC = $6 + $16 = $22), resulting in a profit of $2 per unit. At Q = 200, the total profit is $400 (200 units * $2 profit per unit).

Suppose Product Price Is Fixed at $24; MR = MC