9.3 Short-Run Decisions
Assume the following total cost schedule for a perfectly competitive firm.
TABLE 9-2
-Refer to Table 9-2.At what price would a profit-maximizing firm earn zero economic profits?
A)$40
B)$70
C)$145
D)$220
E)$430

Question

9.3 Short-Run Decisions
Assume the following total cost schedule for a perfectly competitive firm.
  TABLE 9-2
-Refer to Table 9-2.At what price would a profit-maximizing firm earn zero economic profits?
A)$40 
B)$70 
C)$145 
D)$220 
E)$430

Quizplus · Accepted Answer

To find the price at which a profit-maximizing firm would earn zero economic profits, we need to find where the firm's total revenue (P x Q) would be equal to its total cost (TC) that includes both fixed and variable costs. 
At a price of $70, the quantity demanded would be 12 and the total revenue would be $840. The total cost at this output level would be $840, which means that the profit earned would be zero. At any other price level, the profit would be negative or positive, depending on the price and output level. Therefore, the correct answer is B.

9.3 Short-Run Decisions Assume the Following Total Cost Schedule for a Perfectly Competitive