Answer the question on the basis of the following demand and cost data for a specific firm. $ \quad$$ \quad$$ \quad$$ \quad$$\text { Demand Data }$ $ \quad$$ \quad$$ \quad$ $\text { Cost Data }$
$\begin{array}{|c|c|c|c|c|}
\hline(1) &(2)&(3)&&\text { Total } \
\text { Price }&\text { Price }&\text { Quanti }&\text { Outpu }&\text { Cost } \
&&\text { ty }& \text { t }\
\hline 11.0 & \$ 10.0 & 6 & 6 & \$ 61 \
\hline 9.99 & 8.85 & 7 & 7 & 62 \
\hline 9.00 & 8.00 & 8 & 8 & 64 \
\hline 8.00 & 7.00 & 9 & 9 & 67 \
\hline 7.10 & 6.10 & 10 & 10 & 72 \
\hline 6.00 & 5.00 & 11 & 11 & 79 \
\hline 5.15 & 4.15 & 12 & 12 & 86 \
\hline
\end{array}$ Suppose that entry into the industry changes this firm's demand schedule from columns (1) and (3) to columns (2) and (3). Economic profit will

Question

Answer the question on the basis of the following demand and cost data for a specific firm. $ \quad$$ \quad$$ \quad$$ \quad$$\text { Demand Data }$ $ \quad$$ \quad$$ \quad$ $\text { Cost Data }$
$\begin{array}{|c|c|c|c|c|}
\hline(1) &(2)&(3)&&\text { Total }  \
\text { Price }&\text { Price }&\text { Quanti }&\text { Outpu }&\text { Cost } \
&&\text { ty }& \text { t }\
\hline 11.0 & \$ 10.0 & 6 & 6 & \$ 61 \
\hline 9.99 & 8.85 & 7 & 7 & 62 \
\hline 9.00 & 8.00 & 8 & 8 & 64 \
\hline 8.00 & 7.00 & 9 & 9 & 67 \
\hline 7.10 & 6.10 & 10 & 10 & 72 \
\hline 6.00 & 5.00 & 11 & 11 & 79 \
\hline 5.15 & 4.15 & 12 & 12 & 86 \
\hline
\end{array}$ Suppose that entry into the industry changes this firm's demand schedule from columns (1) and (3) to columns (2) and (3). Economic profit will

Quizplus · Accepted Answer

To calculate economic profit, we need to use the formula:

Profit = Total Revenue - Total Cost

Initially, the firm was selling 6 units at a price of $11, which gives a total revenue of $66. The cost of producing 6 units is $61, which gives a profit of $5.

If entry into the industry changes the firm's demand schedule to column (2), then the firm can now only charge a price of $10 to sell 6 units, which gives a total revenue of $60. The cost of producing 6 units is still $61, which gives a profit of -$1.

Therefore, economic profit will decline to zero, since the firm will not be earning any profits. Hence, the correct answer is D.

Answer the Question on the Basis of the Following Demand \quad

Answer the Question on the Basis of the Following Demand $\quad$