The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive industry.

-Refer to the figure above.What is the maximum profit that the firm can make?
A) $30
B) $60
C) $90
D) $180

Question

The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive industry.
 
-Refer to the figure above.What is the maximum profit that the firm can make?
A) $30 
B) $60 
C) $90 
D) $180

Quizplus · Accepted Answer

The maximum profit occurs at the point where MC = MR and at this point, the ATC curve intersects the demand curve. In the given figure, that point of intersection is at a quantity of 5 units. At this quantity, the price is $70 per unit, and the ATC is $10 per unit. Therefore, the profit per unit is $60 ($70 - $10) and total profit is $300 ($60 x 5 units). Hence, the maximum profit that the firm can make is $60.

The Following Figure Shows the Marginal Cost Curve and the Average