Question

Tombstones are produced in a competitive price-searcher market. One producer, Rolling Stones, sells 20 tombstones a week at a price of $500 each. Its average total cost is $600. From this information, we can conclude:_______

a. new tombstone firms will want to enter.
b. this producer is losing $2,000 a week.
c. this producer is making an economic profit of $400.
d. this producer is setting MR = MC.
e. this producer should increase production.

Answer 1

Answer:

b. this producer is losing $2,000 a week.

Explanation:

The computation is shown below:

As we know that

Profit = (Price - Average total cost) × Quantity

= ($500 - $600) × 20

= -$2,000

This negative amount represents that there is a loss of -$2,000

Hence, option B is correct as the producer losing $2,000 in a week

Therefore all the other options are wrong