a price of $16 per pizza for a quantity of 40.

Once the firm has chosen price and quantity, it’s in a position to calculate total revenue, total cost, and profit. At a

quantity of 40, the price of $16 lies above the average cost curve, so the firm is making economic profits. From

Table 10.1 we can see that, at an output of 40, the firm’s total revenue is $640 and its total cost is $580, so

profits are $60. In Figure 10.3, the firm’s total revenues are the rectangle with the quantity of 40 on the

horizontal axis and the price of $16 on the vertical axis. The firm’s total costs are the light shaded rectangle with

the same quantity of 40 on the horizontal axis but the average cost of $14.50 on the vertical axis. Profits are total

revenues minus total costs, which is the shaded area above the average cost curve.

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10.1 • Monopolistic Competition 243
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