Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits. If the price of memory cards is $9, if Mikail's output is 3,000 cards a month, and if his monthly average total cost is $7, what are his monthly profits? $27,000 $6,000 $21,000 $2

Question

Business

Davon Harmon

10 April, 18:52

Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits. If the price of memory cards is $9, if Mikail's output is 3,000 cards a month, and if his monthly average total cost is $7, what are his monthly profits? $27,000 $6,000 $21,000 $2

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Answers (1)

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Evelin · Answer 1

B. $6000

Explanation:

Given that

Price = $9

Average total cost (ATC) = $7

Output (Q) = 3000

Two methods can be used in calculating profit in this case.

The first method is

Profit = (price - ATC) * Q

= (9 - 7) * 3000

= 2 * 3000

= $ 6000

The second method is

Profit = Total revenue (TR) - Total Cost (TC)

Where TR = Price * Q = 9 * 3000 = $27000

TC = ATC * Q = 7 * 3000 = $ 21000

Therefore,

Profit = 27000 - 21000

= $6000

Any method used will result to the same answer.

NOTE THAT,

ATC = Total cost / Q.

So change of formula was used to obtain Total cost from this formula.