Consider a firm operating in a competitive price-taker market. The firm is producing 40 units of output, has an average cost of production equal to $5, and is earning $240 economic profit in the short run. What is the current market price?
A) $9
B) $10
C) $11
D) $12

Question

Quizplus · Accepted Answer

The firm's total cost is 40 units * $5 = $200. With an economic profit of $240, total revenue is $200 + $240 = $440. Therefore, the market price is $440 / 40 units = $11.

Consider a Firm Operating in a Competitive Price-Taker Market