Assume that the equilibrium price in a perfectly competitive industry is $4.25. If a firm in this industry produces and sells 10 units with an average total cost of $5.00, it will:

Question

Quizplus · Accepted Answer

If the equilibrium price in a perfectly competitive industry is $4.25, and the firm produces and sells 10 units with an average total cost of $5.00, its total cost would be $50 (i.e. 10 x $5.00). 
Therefore, its revenue would be $42.50 (i.e. 10 x $4.25), which is less than its total cost of $50, resulting in a loss of $7.50 (i.e. $50 - $42.50). So, the firm would suffer a loss of $7.50. Therefore, option D is the correct choice.

Assume That the Equilibrium Price in a Perfectly Competitive Industry