Ball Bearings, Inc. faces the following costs of production: fixed costs of \$2,000 and variable costs of \$3,000. If the company sells 1,000 units at a price of \$7 per unit, what is its profit?

• A. \$2,000
• B. \$2,000
• C. \$2,000
• D. \$3,000

Answer: (B)

Verified step by step guidance

1. Identify the total revenue (TR) by multiplying the price per unit (P) by the quantity sold (Q). Use the formula: \(TR = P \times Q\).
2. Calculate the total cost (TC) by adding fixed costs (FC) and variable costs (VC). Use the formula: \(TC = FC + VC\).
3. Substitute the given values into the formulas: fixed costs = \$2,000\(, variable costs = \)3,000\(, price per unit = \)7$, and quantity = 1,000 units.
4. Compute total revenue using the values: \(TR = 7 \times 1000\).
5. Calculate profit by subtracting total cost from total revenue using the formula: \(\text{Profit} = TR - TC\).