Question

A Perfectly Competitive firm Produces 50 units of Output , at equilibrium, in the short run. the total cost borne by the firm is $300 and revenue is $2 therefore the firm:

a ) is just breaking even

b) Is experiencing dis-economies of scale

c) is earning positive profits

d) is facing a positively sloped demand curve

e) is suffering loses

Answer 1

Workings

Units – 50

Total cost - $300

Revenue/unit - $2

Total revenue = Number of units * unit price = 50*2= $100

Profit/Loss = Total revenue – Total cost = $100 - $300= - $200

Loss= -$200

Answer: e) the firm is suffering losses