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A perfectly competitive firm has fixed costs of $1 million a month, variable costs of $2 million a month and product sales of $3 million a month. what statement is a correct analysis of the situation

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abiolataiwo2015

Assuming a perfectly competitive firm has fixed costs of $1 million per month the company is making $0 profit.

The correct analysis

Using this formula

Analysis=Sales-Fixed cost-Variable cost

Where:

Sales=$3 million

Fixed cost=$1 million

Variable cost=$2 million

Let plug in the formula

Analysis=$3 million-$1 million-$2 million

Analysis=$0

Inconclusion the company is making $0 profit.

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