CA Foundation P4 · Chapter 4 · Question 15 of 15
A perfectly competitive firm faces a market price of Rs. 25. At its profit-maximising output of 400 units, its average total cost is Rs. 21. Its total profit is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Rs. 1,600
Explanation
Profit = (P - ATC) x Q = (25 - 21) x 400 = Rs. 1,600. Equivalently TR = 25 x 400 = 10,000 and TC = 21 x 400 = 8,400, so profit = 10,000 - 8,400 = 1,600. Rs. 4 is only profit per unit.
More Price Determination in Different Markets MCQs
- Q2A monopolist faces the demand curve P = 50 - 2Q. At Q = 10, total revenue and marginal revenue respectively are:
- Q3If average revenue is Rs. 60 and price elasticity of demand is 3, marginal revenue is:
- Q4Market demand is Qd = 200 - 5P and market supply is Qs = 50 + 10P. The equilibrium price and quantity are:
- Q5In the short run, a perfectly competitive firm will shut down if the market price falls below:
- Q6In long-run equilibrium under perfect competition, each firm: