Rose growing is a perfectly competitive industry and all growers have the same c

Question

Rose growing is a perfectly competitive industry and all growers have the same costs. The market price of roses is $18 a bouquet and each grower maximizes profit by producing 2,300 bouquets a week. Average total cost of producing roses is $10 a bouquet and average variable cost is $8 a bouquet. Minimum average variable cost is $4 a bouquet. Calculate each grower's economic profit or loss in the short run. In the short run, each grower is >>If the firm incurs an economic loss, select loss in the dropdown window and do not enter a minus sign | of $| | a week.

Explanation / Answer

Economic profit = Q x (P - ATC)

Q = 2300

P = $18 , ATC = $10

Economic profit = 8 x 2300 = $18400 per week

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