$30

$30

$30

$30

$30

$30

$30

$40

$55

$75

-

$10.00

$12.50

$15.00

$100

$17.50

$130

$20.00

$165

$22.50

-

$40.00

$27.50

$25.00

$25.00

$26.00

$27.50

$10

$15

$20

$25

$30

$35

4. a. Total revenues in this example will be a quantity of five units multiplied by the price of $25/unit,

which equals $125. Total costs when producing five units are $130. Thus, at this level of quantity and

output the firm experiences losses (or negative profits) of $5.

b.

If price is less than average cost, the firm is not making a profit. At an output of five units, the average

cost is $26/unit. Thus, at a glance you can see the firm is making losses. At a second glance, you can

see that it must be losing $1 for each unit produced (that is, average cost of $26/unit minus the price of

$25/unit). With five units produced, this observation implies total losses of $5.

c. When p
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