Aprofit-maximizing firm in a competitive market is currently producing 100 units of output. it has a price of $10, average total cost of $8, and fixed cost of $200. given this, profit is marginal cost is and average variable cost

$200; $10; $6

Explanation:

(i) Profit is the difference between total revenue and total cost.

Profit = Total revenue - Total cost

         = (Average revenue - Average cost) Q

         = ($10 - $8) × 100 units

         = $200

(ii) Under a perfectly competitive market conditions, the average revenue and marginal revenue are equal and profit maximizing firms under these market conditions producing at a point where marginal revenue is equal to the marginal cost.

Therefore, the marginal cost is equal to $10.

(iii) The average cost is the sum total of average fixed cost and average variable cost.

AC = AFC + AVC

AVC = AC - AFC

        = $8 - ($200 ÷ 100 units)

        = $8 - $2

        = $6

Therefore, average variable cost is equal to $6.

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