Question

A perfectly competitive firm has the following cost schedule

Output (units)	0	1	2	3	4	5	6	7	8	9	10
MC(Rs.)	-	11	10	9	8	7	6	7	10	13	19
TC(Rs.)	9	20	30	39	47	54	60	67	77	90	109

At the market price of Rs. 6, the maximum profits would be __________.

• A. Rs.5
• B. Rs.10
• C. Rs. 15
• D. Rs.(-)24

Answer 1

The correct option is D Rs.(-)24

Firm will operate at the point that MC =AR (price).

Therefore, the firm will produce at output level 6 as MC =AR (price), ie 6

We know that total cost = 60

Total revenue = price x quantity produced and sold

= 6 x 6

= 36

Profit = TR - TC

= 36 - 60

= -24