a firm produces 10 widgets that they sell for 15 each The av

a firm produces 10 widgets that they sell for $15 each. The average variable cost of 10 widgetsis $13/unit. The fixed cost for this firm is $20. What is the value of this firms profit.

Solution

Profit = Total revenue - Total cost

Total revenue = 10 x $15, as the firm is selling 10 units for $15 each the total revenue will be $150.

Total cost = Variable cost + Fixed cost

Variable cost = $13 x 10. = $130. Fixed cost is $20.

The total cost incurred by the firm is $150.

Profit = $150 - $150

The total profit earned by the firm is Zero. The firm is only breaking even.