Question at position 8 Consider the following information for a producer. Elvin the Pixie produces and sells toys in a perfectly competitive market. He can sell each toy for $20 per unit. When he produces 300 toys, the average variable cost is $15, and the average total cost is $25. Assume that the current production of toys Buddy of 300 units is his profit-maximizing/loss-minimizing quantity. Calculate his total revenue, total cost, and total profit at 300 units of output.(TR=6,000,TC=7,500,Profit=−1,500)\left(TR=6,000,TC=7,500,Profit = -1,500\right) at 300 units of output.(TR=7,500,TC=6,000,Profit=1,500)\left(TR=7,500,TC=6,000,Profit = 1,500\right) at 300 units of output.(TR=4,000,TC=6,000,Profit=−2,000)\left(TR=4,000,TC=6,000,Profit = -2,000\right) at 300 units of output.(TR=6,000,TC=4,000,Profit=2,000)\left(TR=6,000,TC=4,000,Profit = 2,000\right) at 300 units of output.

Question

Question at position 8 Consider the following information for a producer. Elvin the Pixie produces and sells toys in a perfectly competitive market. He can sell each toy for $20 per unit. When he produces 300 toys, the average variable cost is $15, and the average total cost is $25. Assume that the current production of toys Buddy of 300 units is his profit-maximizing/loss-minimizing quantity. Calculate his total revenue, total cost, and total profit at 300 units of output.(TR=6,000,TC=7,500,Profit=−1,500)\left(TR=6,000,TC=7,500,Profit = -1,500\right) at 300 units of output.(TR=7,500,TC=6,000,Profit=1,500)\left(TR=7,500,TC=6,000,Profit = 1,500\right) at 300 units of output.(TR=4,000,TC=6,000,Profit=−2,000)\left(TR=4,000,TC=6,000,Profit = -2,000\right) at 300 units of output.(TR=6,000,TC=4,000,Profit=2,000)\left(TR=6,000,TC=4,000,Profit = 2,000\right) at 300 units of output.

BlackTom AI · Accepted Answer

Question at position 8 asks us to compute total revenue, total cost, and total profit for 300 units of output given a perfectly competitive producer.
First, recall the key numbers: price per toy is $20, quantity is 300, average total cost (ATC) is $25, and average variable cost (AVC) is $15.
From price and quantity, total revenue (TR) is TR = Price × Quantity = 20 × 300 = 6,000. This establishes the top line of the financial picture.
Next, total cost (TC) can be obtained from ATC: TC = ATC × Quantity = 25 × 300 = 7,500. This sets the bottom line of the cost side, showing how much is spent overall for producing 300 units.
Profit equals TR minus TC: Profit = TR − TC = 6,000 − 7,500 = −1,500. The negative result indicates a loss of $1,500 at this output level.
Now evaluate each option:
Option 1: TR = 6,000, TC = 7,500, Profit = −1,500. This aligns exactly with the calculations above, showing the correct TR, TC, and profit for 300 units.
Option 2: TR = 7,500, TC = 6,000, Profit = 1,500. Here, revenue and costs are swapped relative to the computed values, and the profit is positive. This misstates both TR and TC and misrepresents the sign of profit.
Option 3: TR = 4,000, TC = 6,000, Profit = −2,000. The TR is far too low for 300 units at $20 each (it should be $6,000), so this option is inconsistent with the given price and quantity.
Option 4: TR = 6,000, TC = 4,000, Profit = 2,000. While TR matches the correct revenue, the TC is unrealistically low given ATC of $25 and 300 units (TC should be 7,500). The resulting profit would also be positive, contradicting the correct loss indicated by the data.
In summary, options 2, 3, and 4 all contain at least one key numerical mistake (in TR, TC, or profit) that makes them incorrect, whereas option 1 precisely reflects the derived values from TR, TC, and profit calculations for 300 units.

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