Suppose a perfectly competitive cotton farmer can produce 10 containers of cotton at an output at which marginal cost equals marginal revenue. The price per container of cotton is $100 and the average total cost is $75. What is the profit or loss that this cotton farmer is earning?

Question

Quizplus · Accepted Answer

The profit is calculated as follows: 
Profit = Total Revenue - Total Cost 
Total Revenue = Price per container * Number of containers = $100 * 10 = $1000 
Total Cost = Average Total Cost * Number of containers = $75 * 10 = $750 
Profit = $1000 - $750 = $250 
Therefore, the cotton farmer is earning a profit of $250.

Suppose a Perfectly Competitive Cotton Farmer Can Produce 10 Containers