Consider the following total cost schedule for a perfectly competitive firm producing ball-point pens.
TABLE 9-3
-Refer to Table 9-3.Suppose the prevailing market price for this firm's product is $0.45.If the firm is producing 20 units of output per period,then its profit per unit is ________ and its total profit per period is ________.
A)$9; $180
B)$0.05; $1.00
C)$6; $120
D)$0.01; $2
E)$0.40; $8

Question

Consider the following total cost schedule for a perfectly competitive firm producing ball-point pens.
  TABLE 9-3
-Refer to Table 9-3.Suppose the prevailing market price for this firm's product is $0.45.If the firm is producing 20 units of output per period,then its profit per unit is ________ and its total profit per period is ________.
A)$9; $180 
B)$0.05; $1.00 
C)$6; $120 
D)$0.01; $2 
E)$0.40; $8

Quizplus · Accepted Answer

The variable cost of producing 20 units of output is $3.80 (from the given total cost schedule). Therefore, the total cost of producing 20 units is $5.00 (fixed cost) + $3.80 (variable cost) = $8.80. 
At a market price of $0.45 per unit, the firm's total revenue is $0.45 × 20 = $9.00. 
The firm's total profit per period is its total revenue minus its total cost, which is $9.00 − $8.80 = $0.20. 
Therefore, the firm's profit per unit is $0.20 ÷ 20 = $0.01. 
Hence, the correct choice is B.

Consider the Following Total Cost Schedule for a Perfectly Competitive