The ERT Company sells lead pencils in a perfectly competitive market for $5 per box of a dozen pencils. The firm currently produces 2,500 boxes of lead pencils each week and average total cost at this level of production is $5.15
What level of profit is this firm earning? Explain.
The ERT Company is earning negative profits of $375 per week. This can be calculated by taking total revenue ($5 x 2,500 = $12,500) and subtracting total cost ($5.15 x 2,500 = $12,875).
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