# Okay, this is due Tuesday. I'm woking on it but if anyone can help that would be great!

Suppose firm A opeates in a perfectly competitive market. The price that currently prevails in the market is \$1,000. Firm A's marginal cost is 20Q, where Q is output. Thus, as output increases, marginal cost will increase.
a) In general, what is a perfectly competitve firm's profit maximizing condition.
I believe this is MR=MC

b) Using the condition in part a, calculate firm A's profit-maximizing level of output.

c) For the output calculated in part b, assume the average total cost is \$900. Calculate firm A's economic profit or loss.

Your are correct, set MR=MC, solve for Q (simple algebra). Note, MR=P, and Total revenue=P*Q.

yes

yes

Thanks! So for part c I came up with a profit of \$5,000. Is that correct?

## To calculate firm A's profit or loss, we need to consider the relationship between average total cost (ATC) and price.

1. Start with the profit-maximizing level of output (Q) calculated in part b.

2. Calculate the total cost (TC) by multiplying the average total cost (\$900) by the quantity (Q).

TC = ATC * Q

3. Calculate the total revenue (TR) by multiplying the price (\$1,000) by the quantity (Q).

TR = P * Q

4. Calculate the profit or loss by subtracting the total cost from the total revenue.

Profit = TR - TC

In your case, if you obtained a profit of \$5,000, it means that the total revenue exceeds the total cost by \$5,000. Thus, firm A would have a profit of \$5,000 given the information provided.