A firm produces 20 units of output at a market price of 5 a

A firm produces 20 units of output at a market price of $5, a marginal cost of $5, and an average cost of $3. the firm\'s economic profit is $ _ and the firm _ maxmimizing it\'s economic profit

Solution

The total revenue is $100. The total cost is $60. The economic profit is thus $40. The difference between the total revenue and total cost. The firm maximizes profits where marginal revenue = marginal cost. Here we have P=mc. Thus the profits are maximized.