Assume the price of a product is $20, and the table below shows total costs for various levels of output. [table]
Quantity | 0 | 1 | 2 | 3 | 4 | 5 | 6 Total Costs | $15 | $20 | $22 | $28 | $37 | $58 | $105
[/table] What is the profit when output is 1? (Do not use the dollar sign in your answer)

Question

BlackTom AI · Accepted Answer

Profit equals total revenue minus total cost, so compute revenue at Q = 1 and subtract the total cost given for Q = 1.

1) Relevant knowledge points and concepts
- Total revenue (TR) = Price × Quantity.
- Profit (π) = Total revenue − Total cost (TC).
- Use the TC value corresponding to the given output level (here TC at Q = 1).

2) Step-by-step reasoning
- The price is given as 20 and the output level is 1, so compute TR.
- Read the table to find TC when Quantity = 1.
- Subtract TC from TR to get profit.

3) Calculations with intermediate steps
- TR = Price × Quantity = 20 × 1 = 20.
- TC at Q = 1 (from the table) = 20.
- Profit π = TR − TC = 20 − 20 = 0.

4) Why the correct answer is correct
- The firm receives 20 in revenue for selling one unit and incurs total costs of 20 at that production level; since revenue exactly equals total cost, there is neither a positive nor negative profit — profit is zero. This directly follows from the definitions of revenue and profit.

5) Why other common answers would be incorrect
- Answer 5 would be incorrect if someone used TC at Q = 0 (15) and subtracted it from revenue: that confuses fixed cost with total cost at the chosen output. Using TC = 15 would give 20 − 15 = 5, but that is wrong because TC at Q = 1 is 20, not 15.
- A negative answer (e.g., −15) would be incorrect because it would imply TC > TR; here TC equals TR, so profit is not negative.

6) Conclusion
- Final profit at output 1 is 0, which matches the provided answer.

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