Suppose a perfectly competitive asparagus farm can produce six containers of asparagus at an output at which marginal cost equals marginal revenue. The price per container of asparagus is $100 and the average total cost is $75. What is the profit or loss that this asparagus farm is earning?

Question

Quizplus · Accepted Answer

The profit-maximizing output for a perfectly competitive firm is where marginal cost equals marginal revenue. Since the farm can produce six containers of asparagus at this output level, they will earn a profit equal to the difference between the price and average total cost multiplied by the number of containers sold.

Profit = (Price - Average Total Cost) x Output
Profit = ($100 - $75) x 6
Profit = $150.00

Therefore, the asparagus farm is earning a profit of $150.00. The correct answer is C).

Suppose a Perfectly Competitive Asparagus Farm Can Produce Six Containers