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Chapter 25 and 26 Problems

Chapter 25 and 26 Problems

Q Chapter 25 Problems 25-2.a. In the diagram at the top next column, the profit maximizing output is determined at the point where the marginal revenue becomes equal to that of the marginal cost. As per the diagram, there are two outputs where the profit is getting maximized. When the price of $28 then the quantity being produced by the firm is 100 units per day and thus the total revenue in this case will be $28*100 = $2800 and the total cost will also be $2800. On the other hand, the profit is calculated by subtracting total revenue from total cost and thus it turns out to be $(2800-2800)= 0. b. Profit is earned by the firm when it remains in the short run while in the long run it is found to be earning zero economic profit. As per the diagram, the firm is in long run and hence it is earning zero economic profit.

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