A company operating in a perfectly competitive market produces 50 units, which is its profit-maximizing output. The market price per unit is £2, with total fixed costs of £25 and total variable costs amounting to £40. What is the firm's economic profit?
Explanation
The firm's total revenue is 50 units × £2 = £100. Total costs equal fixed costs (£25) plus variable costs (£40), totaling £65. Economic profit is total revenue minus total costs: £100 - £65 = £35.