A competitive industry consists of 100 firms. The short-run marginal cost curve for each firm is given by MC = 200 + .3Q. The demand curve faced by the industry is given as P = 400 - .1Q. How much profit is each firm making if fixed costs are $375 per firm?
What will be an ideal response?
This question requires one to go from the MC to the total cost curve which will be TC = 200Q + 15Q + 375. Total costs are $1,750 per firm and revenue is $350 × $5 which is $1,750. Thus no economic profit exists.
Economics
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