In a situation when a firm is operating in a perfectly competitive firm and the total cost is given perfectly…

Analyze the question: A perfectly competitive firm sells at the market price of N7.00 per unit. Total cost (TC) is N75.00 and output is 25 units. We need the profit.

Concept:

• In perfect competition, the firm is a price taker, so Price = Average Revenue = Marginal Revenue.
• Total Revenue (TR) = Price × Quantity
• Profit = TR − TC

Solution:

1. TR = P × Q = N7.00 × 25 = N175.00
2. TC = N75.00
3. Profit = TR − TC = N175 − N75 = N100

Check against the options:

• N175.00 (option C) is the total revenue, not the profit. This is the common trap.
• N75.00 (option A) is the total cost.

Answer: B (N100)

Tip: Always compute TR first, then subtract TC. If an option equals TR or TC alone, it is usually a distractor. Remember: Profit = TR − TC.