Quantity Total Cost
(Dollars) Variable Cost
(Dollars)
0 $1,000 $0
100 1,360 360
200 1,560 560
300 1,960 960
400 2,760 1,760
500 4,000 3,000
600 5,800 4,800
Table 11-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
Refer to Table 11-1. If the market price of each camera case is $8 and the firm maximizes profit, what is the amount of the firm's profit or loss
Both production runs of 300 and 400 produce the same profit and the maximized profit. Take it from here.
440
To determine the firm's profit or loss, we need to calculate the total revenue and total cost.
Total revenue can be calculated by multiplying the quantity of camera cases sold by the market price. In this case, the market price is $8.
To find the quantity of camera cases sold, we need to look at the given table. In the table, the quantity increases in batches of 100 units. Since output can only be increased in batches of 100 units, we can see that the firm sells 500 camera cases.
Total revenue = Quantity sold * Market price
Total revenue = 500 * $8
Total revenue = $4,000
Now, let's calculate the total cost.
In the table, we are given the total cost and variable cost for different quantities. To get the total cost, we need to add the fixed cost to the variable cost.
At 500 units, the total cost is given as $4,000 and variable cost is given as $3,000. Therefore, the fixed cost would be the difference between total cost and variable cost.
Fixed cost = Total cost - Variable cost
Fixed cost = $4,000 - $3,000
Fixed cost = $1,000
Now we can calculate the total cost.
Total cost = Fixed cost + Variable cost
Total cost = $1,000 + $3,000
Total cost = $4,000
Finally, we can calculate the firm's profit or loss.
Profit = Total revenue - Total cost
Profit = $4,000 - $4,000
Profit = $0
Since the profit is $0, we can conclude that the firm is not making any profit or loss at a market price of $8 per camera case.