Yesterday a perfectly competieve producer of construction bricks manufactured an
ID: 1102008 • Letter: Y
Question
Yesterday a perfectly competieve producer of construction bricks manufactured and sold 10,000 bricks per week at market price that was just equal to the minimum average variable cost of producing each brick. Today all firms cost are the same, but the market price of bricks has declined.
A) Assuming that this firm has positive fixed costs, did the firm earn an ecomonic profits, economic losses or zero economic profits yesterday?
B) To maximize economic profits today how many bricks should this firm produce today?
Explanation / Answer
a) Assuming that this firm has positive fixed costs, did the firm earn economic profits, economic losses, or zero economic profit yesterday?
The firm earned economic losses =fixed costs yesterday. Because TR equalled TVC only and profits are defined as TR
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