-The figure above shows a perfectly competitive firm.If the market price is $40 per unit,then the firm produces ________ units and makes an economic profit that is ________.
A) more than 45; more than $400
B) 40; more than $400
C) 40; less than $400
D) 30; equal to zero
E) 30; more than $250

Question

-The figure above shows a perfectly competitive firm.If the market price is $40 per unit,then the firm produces ________ units and makes an economic profit that is ________.
A) more than 45; more than $400 
B) 40; more than $400 
C) 40; less than $400 
D) 30; equal to zero 
E) 30; more than $250

Quizplus · Accepted Answer

At a market price of $40 per unit, the firm will produce where its marginal cost (MC) equals the market price, which is at 40 units. The area representing economic profit is the rectangle formed by the price above the average total cost (ATC) curve, over the quantity produced. Since the price is significantly above the ATC at 40 units, the economic profit is more than $400.

-The Figure Above Shows a Perfectly Competitive Firm