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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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BuyFindarrow_forward

Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

Firm A charged $4 per unit when it produced 100 units of good X, and it charged $3 per unit when it produced 200 units. Furthermore, the firm earned the same profit per unit in both cases. How can this happen?

To determine

Explain the same profit per unit in both cases.

Explanation

When Firm ‘A’ produced 100 units of good X, it is charged $4 per unit and when it produces 200 units, then the profit per unit can be calculated as follows:

Profit per unit=PriceCost=43=1

Thus, the value of profit is $1.

In this case, the economies of scale raises output from 100 units to 200 units

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