Consider the Price and Quantity Data Below for a Perfectly

question 83

Multiple Choice

Consider the price and quantity data below for a perfectly competitive firm producing mousetraps.
TABLE 9-1
-Refer to Table 9-1.Suppose this firm is producing 2000 mousetraps and average variable cost is $5.50.What level of economic profit is this firm earning?

• A)$1000
• B)-$1000
• C)$0
• D)$0.50
• E)There is insufficient information to answer to know.

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Definitions:

Conversion Costs

The combined costs of labor and overhead that are required to transform raw materials into finished products.

Cost Per Equivalent Unit

Calculation of the cost to produce a single unit, taking into account units that are partially completed; particularly useful in process costing systems.

Processing Department

A unit or stage within a manufacturing operation where a particular process or set of processes is performed, transforming raw materials into finished products.

Equivalent Units

A measure used in cost accounting to express the amount of work done during a period in terms of fully completed units of output.