The total fixed costs of a perfectly-competitive manufacturer are $500,and its marginal costs are as follows:

-Refer to the above information to answer this question.If the price of the product is $250,how many will the manufacturer produce and what will be its profit or loss?

Question

The total fixed costs of a perfectly-competitive manufacturer are $500,and its marginal costs are as follows:
 
-Refer to the above information to answer this question.If the price of the product is $250,how many will the manufacturer produce and what will be its profit or loss?

Quizplus · Accepted Answer

To maximize profit in a perfectly competitive market, a manufacturer will produce at the point where marginal cost equals the market price. In this case, the marginal cost equals $50 at a production level of 6. Therefore, the manufacturer will produce 6 units and sell them at $250, resulting in a revenue of $1,500. The total variable cost at this production level equals $300 (6 units * $50 per unit), and adding the fixed cost of $500, the total cost equals $800. Hence, the profit is $700 ($1,500 revenue - $800 total cost), which is the highest among all given options.

The Total Fixed Costs of a Perfectly-Competitive Manufacturer Are $500,and