Firm A charges $8.50 for each unit of Good X.If the average total cost of producing 1,000 units of Good X is $12 and the market for Good X is monopolistically competitive,Firm A ________ by producing 1,000 units of Good X.

Question

Quizplus · Accepted Answer

The average total cost of producing 1,000 units of Good X is $12. 
Thus, the total cost of producing 1,000 units of Good X is 1,000 * $12 = $12,000.

If Firm A charges $8.50 per unit, their total revenue for 1,000 units of Good X is 1,000 * $8.50 = $8,500.

Since total cost ($12,000) is greater than total revenue ($8,500), Firm A incurs a loss of $3,500. Therefore, the correct answer is D.

Firm a Charges $8