Microeconomics: Principles, Applications, and Tools (8th Edition)

Published by Prentice Hall
ISBN 10: 0-13294-886-9
ISBN 13: 978-0-13294-886-9

Chapter 9 - Perfect Competition - Exercises - 9.2 The Firm's Short-Run Output Decision - Page 228: 2.6

Answer

\$40 IS

Work Step by Step

Economic profit is = (P - AC) * Q = (5 - 3) * 20 = \$40 Check if profit is maximized: Profit maximized when MR = MC. In perfect competition, MR = P = 5, and given MC = 5 → condition satisfied. The firm is maximizing its economic profit.
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