Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 25 cents, then at this firm's profit maximizing level of output, the firm will earn an economic ________ of ________ per day.

Question

Quizplus · Accepted Answer

At a price of 25 cents, the firm should produce 80 doughnuts per day because at that quantity, marginal cost equals 25 cents. At 80 doughnuts a day, the firm's total revenue is $20 (= 0.25 × 80)and its total cost is $12 (= 0.15 × 80), so its economic profit is $8.

Refer to the Accompanying Figure