O produce 110 units of output, charge a price of $98, and earn a profit of $1078

Question

O produce 110 units of output, charge a price of $98, and earn a profit of $10780 O produce 110 units of output, charge a price of $98, and earn a profit of $6030 DQuestion 15 2 pts Suppose a firm is producing a level of output such that marginal revenue is equal to marginal cost. The firm is selling its output at a price of $8 per unit and is incurring average variable costs of $6 per unit and average total costs of $7 per unit. Given this information, it may be concluded that the firm: O is operating at maximum total profit O is operating at a loss that could be reduced by shutting down is operating at a profit that could be increased by producing more output O is operating at a loss that is less than the loss incurred by shutting down No new data to save. Last checked at 11:15pm Submit Quiz MacBook Air

Explanation / Answer

Since a firm is operating at a level of output such that the marginal revenue is equal to marginal cost, it means that firm is operating at an equuliequil point. At this point price is $8, which is higher than average variable cost ($6 per unit) and average total cost ($7 per unit). This firm is able to cover their cost by charging price of $8. It implies that firm is already operating at a maximum total profit.

So, the correct answer is " is operating at a maximum total profit".

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