Question

Consider the firm discussed in Problem 23-13. If the firm were to produce the 12th unit and thereby incur hourly total costs of $65, what would be its marginal cost? Based on this answer and your answers to Problem 23-13, would producing 12 units maximize the firm's profits? What would be its hourly economic profits?

Short answer

The economic profits would be negative.

Step-by-step solution

Introduction

The economic profit of a firm is determined by deducting complete income from all-out costs. The complete costs comprise both certain and express expenses. Unequivocal expense is the customary expenses of the firm like lease, pay rates to the workers and so on.

Explanation Part (1)

In the perfect competition, the cost line is the demand curve of the firm and it is equivalent to the typical income and minimal income of the firm. The perfect competition is a simply serious market type selling homogenous items.

Explanation Part (2)

The qualities of perfect competition are there are numerous vendors and purchasers in the market, firms got the opportunity of passage and leave importance whenever another firm can go into the market or a current firm can leave the market. Calculating the economic profits,

Economic profit = Total revenue - total cost

$60-65=-5$

Hence, the economic profits would be negative.