This Question: 1 pt 25 of 45 (14 complete) v This Test: 45p The chart on the ngh

Question

This Question: 1 pt 25 of 45 (14 complete) v This Test: 45p The chart on the nght displays cost and demand curves facing a typed firm in a constant cost perfectly competitive industry MC ATC The company's manager suggests that the company's goal should be to maximize average proft. In that case, what is the output level and what is the average profit that will achieve the manager's goal? AV MR O A. 1,100 units, average proft $6 O B. Q-1,350 units, average profit-sa c. Q 31,350 units, average profit : $5 O D. Q1.800 units average profit $20 1 750 1,100 1,350 1,800 Quantity Click to select your answer

Explanation / Answer

Ans) C is the correct option. Q = 1,350 units, average profit = 5

At profit maximisation MR is equal to MC

Total revenue = price *quantity = 20*1,350 = 27,000

Total cost = ATC *quantity = 15*1350= 20,250

Profit = total revenue - total cost = 27,000 - 20,250 = 6,750

Average profit = profit /quantity = 6,750/1,350 = 5

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