| Chapter 22. Perfect Competition# 1: Calculating Total Profit Using a Graph
We're going to use data from Figure 22.1 to calculate the total profit of this perfect competitor. We'll be using this formula: Total Profit = Output (Price - ATC). Please look at the graph and write down the output, price, and ATC.
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Figure 22.1
The output is 65 (where MC and MR intersect). At that output ATC = $11. And price, which is read from the demand curve, D, is $14. Now plug the numbers into the formula and solve for total profit.
Solution:| Total Profit | = | Output (Price - ATC) | | = | 65 ($14 - $11) | | = | 65 ($3) | | = | $195 |
#2: Calculating Total Loss Using a Graph
Use the data in Figure 22.2 to find this firm's total loss (i.e., negative total profit).
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Figure 22.2 | Total Profit | = | Output (Price - ATC) | | = | 13 ($10 - $13) | | = | 13 (-$3) | | = | -$39 |
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