Profit maximisation is at 4 units, with supernormal profits at £70,000. This is also where MC MR, at £40,000.
Sales revenue maximising = 6 units, but the firm would make a loss of £20,000.
Efficiency at profit max – ATC is £52,500 – the lowest possible average total cost is £50,000, hence there is a loss of productive efficiency. The price, of £70,000, is greater than the marginal cost, of £40,000, hence there is also allocative inefficiency.
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