Question

Assume the STU Corporation is producing 25 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $150 and its average variable cost is $3 at 25 units of output. This corporation

Answer 1

is earning an economic profit of $25.

or

is earning $1 per unit economic profit

or

stay in the business in the long run.

or

earn zero profit in the long run.

or

has total revenue of $250

or

has a total cost of $225

or

has variable cost or $75

or

has marginal revenue of $10

or

has total revenue of $250 and the total cost of $225 so economic profit is $25

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the price is equal to marginal revenue MR=$10

Economic profit =total revenue -total costs

total revenue =price * quantity

total revenue =10*25=$250

total cost =fixed cost + variable cost

Variable cost =average variable cost * quantity

=3*25

=$75

total cost =150+75

=$225

Economic profit =250-225

=$25

the profit is $25

(note: the question is open-ended so there may be many answers)