Table: Oil Production Costs Refer to the table. If seven barrels of oil are produced, this firm is making: A) a profit because P AC. B) a loss because MC AC. C) a profit because MR MC. D) a loss because TR

Question

Table: Oil Production Costs

Refer to the table. If seven barrels of oil are produced, this firm is making:
A) a profit because P >AC. 
B) a loss because MC > AC. 
C) a profit because MR > MC. 
D) a loss because TR < TC.

Quizplus · Accepted Answer

To determine if the firm is making a profit or a loss, we need to compare the price of oil (P) with the average cost (AC) per barrel. If P > AC, the firm is making a profit. Using the table, we can see that when seven barrels of oil are produced, P is $70 and AC is $60. Therefore, P > AC and the firm is making a profit.