Scenario: A manufacturing firm operates three plants with the marginal cost curves shown in the figure and the average total costs summarized in the table below.

-Refer to the scenario above.If the market price of the firm's product is $80 per 100 kg,what is the firm's profit?
A) $31,000
B) $28,000
C) $23,000
D) $20,000

Question

Scenario: A manufacturing firm operates three plants with the marginal cost curves shown in the figure and the average total costs summarized in the table below.

-Refer to the scenario above.If the market price of the firm's product is $80 per 100 kg,what is the firm's profit?
A) $31,000 
B) $28,000 
C) $23,000 
D) $20,000

Quizplus · Accepted Answer

To find the firm's profit, we need to first calculate the output level for each plant where marginal cost equals the market price of $80. At Plant 1, this occurs at an output level of 100 kg. At Plant 2, this occurs at an output level of 200 kg. At Plant 3, this occurs at an output level of 250 kg.

Next, we need to calculate the corresponding average total cost for each plant at these output levels. We can see from the table that at Plant 1, the average total cost is $60 per 100 kg, at Plant 2 it is $50 per 100 kg, and at Plant 3 it is $44 per 100 kg.

Now we can calculate the profit for each plant by multiplying the difference between the market price and the average total cost at each output level by the respective output level.

For Plant 1, profit = (80 - 60) * 100 = $2,000
For Plant 2, profit = (80 - 50) * 200 = $6,000
For Plant 3, profit = (80 - 44) * 250 = $7,400

Total profit = $2,000 + $6,000 + $7,400 = $31,400

Therefore, the best choice is A) $31,000.

Scenario: a Manufacturing Firm Operates Three Plants with the Marginal