Scenario 9.2
Consider a publicly held firm (one whose stock shares are traded on the stock exchange) that earned revenue worth $350 million and incurred land, labor, and debt costs worth $320 million. The stockholders who have invested a total of $100 million in this firm could have earned 10 percent return on other comparable investments.
-Suppose that Megabucks Corporation is earning an economic profit of $4,000 through the sale of a product. If the price of the product is $6 per unit and its ATC is $4 per unit, Megabucks must be producing 8,000 units.

Question

Quizplus · Accepted Answer

The calculation for the number of units produced by Megabucks Corporation should be based on the economic profit and the difference between the price per unit and the ATC (Average Total Cost) per unit. Given an economic profit of $4,000, a price of $6 per unit, and an ATC of $4 per unit, the profit per unit is $2 ($6 - $4). To earn an economic profit of $4,000 at $2 profit per unit, Megabucks must be producing 2,000 units ($4,000 / $2 per unit = 2,000 units), not 8,000 units.

Scenario 9.2 Consider a Publicly Held Firm (One Whose Stock Shares Are