Answer to Question #63329 in Microeconomics for Ronnie

Question

Alpha Company is a competitive price-taker firm that is currently producing 100 units of output (Q=100). At the current level of production, the firm has Marginal Revenue of (MR=) $12, Marginal Cost of (MC=) $8, and Average Total Cost of (ATC=) $10. Use this information in responding to the following two requests.
1.1. At this level of output (Q), calculate the dollar value of the firm's profit (or loss). Defend/Explain how you calculated that amount.

Answer 1

At Q = 100 MR = $12, MC = $8, ATC = $10.
1.1. At this level of output (Q), the dollar value of the firm's profit (or loss) is TP = (P - ATC)*Q. As the firm is a price-taker, then P = MR = $12, so TP = (12 - 10)*100 = $200.