To maximize its profit,the firm in the figure above produces ________ cans per day and ________.
A) 0; incurs an economic loss of less than $20
B) between 3 to 5 cans; earns a normal profit
C) 10; earns an economic profit of $2.90
D) 10; earns an economic profit of $29
E) more than 10; earns an economic profit

Question

Quizplus · Accepted Answer

The profit-maximizing output is at the point where marginal revenue (MR) equals marginal cost (MC), which is at 10 cans per day in the graph. At this output level, the price is $3.90, and the average total cost is $3. Hence, the economic profit per can is $0.90, and the total economic profit is ($0.90 x 10) = $9 for each day. Therefore, the total economic profit per month is ($9 x 30) = $270, which is equal to the difference between the total revenue and the total cost. Hence, the firm earns an economic profit of $29 per day.

To Maximize Its Profit,the Firm in the Figure Above Produces