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 2? (Do not use the dollar sign in your answer)

Question

BlackTom AI · Accepted Answer

Profit equals total revenue minus total cost. Total revenue (TR) is price times quantity; total cost (TC) is given in the table.

1. Relevant concepts:
- Total revenue = Price × Quantity.
- Profit = Total revenue − Total cost.
- Total cost at a given output is read directly from the table.

2. Step-by-step reasoning:
- Price = 20 (per unit).
- Output (quantity) = 2 units.
- Compute total revenue: TR = Price × Quantity = 20 × 2.
- Read total cost for Q = 2 from the table: TC = 22.

3. Calculations with intermediate steps:
- TR = 20 × 2 = 40.
- TC (at Q = 2) = 22.
- Profit = TR − TC = 40 − 22.

4. Why this is correct:
- Profit measures how much revenue remains after covering all costs. Using the given market price and the tabled total cost at the specified output yields the exact revenue and cost values to plug into Profit = TR − TC. There is no need to separate fixed and variable costs for this calculation because total cost is provided directly.

5. Common mistakes (why other answers would be incorrect):
- Using the price alone (20) as profit is wrong because profit depends on quantity and costs.
- Subtracting the wrong TC (for example TC at Q = 1 or Q = 3) would give an incorrect result; you must use TC at Q = 2 which is 22.
- Forgetting to multiply price by quantity would understate revenue.

6. Conclusion:
- Profit = 40 − 22 = 18. This matches the provided correct answer: 18.

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