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Marginal Revenue and Profit Calculations
hard

A company produces widgets and sells them for $10 each. If the total revenue from selling 100 widgets is $1,000 and the total cost of production is $800, what is the economic profit of the company?

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Choose the Best Answer

A

$200

B

$300

C

$100

D

$0

Understanding the Answer

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Answer

To find the economic profit of the company, we first need to understand the total revenue and total costs involved. The company sells 100 widgets for $10 each, so the total revenue is indeed $1,000. The total cost of producing these widgets is $800. Economic profit is calculated by subtracting total costs from total revenue, so we take $1,000 and subtract $800, which gives us an economic profit of $200. This means the company not only covered its costs but also made an extra $200 from selling the widgets.

Detailed Explanation

To find economic profit, subtract total costs from total revenue. Other options are incorrect because This answer may come from adding costs to revenue instead of subtracting them; This might happen if someone thinks only part of the costs are counted.

Key Concepts

Total Revenue
Profit
Economic Profits
Topic

Marginal Revenue and Profit Calculations

Difficulty

hard level question

Cognitive Level

understand

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