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Suppose, at a given point in time, Sally's smoothie shack operates in a perfectly competitive market and is producing its profit-maximizing level of output. Suppose further that at this level of production its average variable cost of producing a smoothie is $2.90, the average total cost is $4.00, and the marginal cost is $3.60. At her current level of production, what is.. a. Sally's average fixed cost of producing a smoothie? b. Sally's marginal revenue from selling a smoothie? c. The price of the smoothie? d. Sally's profit from selling smoothies? **please explain how you got the answer!

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Kristelle Balando
Kristelle BalandoLv10
29 Sep 2019

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Related questions

Question:

Evaluate the following statement:

In the short-run, information about a perfectly competitive firm's fixed costs is needed to determine both the profit-maximizing level of output and the amount of profit earned when producing that level of output.

Answer:

The profit-maximizing level of output in a perfectly competitive market is determined at the level where marginal revenue (MR) equals marginal cost (MC). Marginal revenue is the additional revenue earned by selling an additional unit of output, while marginal cost is the additional cost of producing an additional unit of output (Farnham, 2014). Additionally, in order to find the amount of profit earned, we need to know the total cost and total revenue amounts. Total cost is the total of variable and fixed cost. Therefore, in short-run production, a firm's fixed cost is needed to determine both the profit-maximizing level of output and the amount of profit earned when producing that level of output.

Farnham, P (2014) Economics for Managers 3rd edition

~Beth

I need a peer reply for this, please.

If a perfectly competitive firm is producing at an output at which marginal cost exceeds marginal? revenue,

A. price will be at the profit-maximizing level.

B. the firm should reduce production.

C. sales will be at the profit-maximizing level.

D. the firm should expand production.

46) If a profit-maximizing firm in a perfectly competitive market is making an economic profit, then it must be producing a level of output where A) marginal cost is greater than average total cost. B) marginal cost is greater than marginal revenue. C) price is greater than marginal revenue. D) price is greater than marginal cost. E) average total cost is greater than marginal cost.

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