Costs of Production and Profit Maximization Analysis for the Perfect Competitive Market

Structure

Microeconomics Course Assignment

In fulfillment of Course ePortfolio and CSIS requirement
This Assignment is required and totals 100 points
Part 1 Perfect Competition Analysis

Costs of Production and Profit Maximization Analysis for the Perfect Competitive Market Structu
Total Average Average
Total Total Fix Variable cost Total Cost Fix Cost Variable Cost
Output/hr Cost (TFC) (TVC) (TC) (AFC) (AVC)
0 $ 12.00 $ - $ 12.00 $ - $ -
1 $ 12.00 $ 6.00 $ 18.00 $ 12.00 $ 6.00
2 $ 12.00 $ 9.00 $ 21.00 $ 6.00 $ 4.50
3 $ 12.00 $ 11.00 $ 23.00 $ 4.00 $ 3.67
4 $ 12.00 $ 12.00 $ 24.00 $ 3.00 $ 3.00
5 $ 12.00 $ 14.00 $ 26.00 $ 2.40 $ 2.80
6 $ 12.00 $ 17.00 $ 29.00 $ 2.00 $ 2.83
7 $ 12.00 $ 21.00 $ 33.00 $ 1.71 $ 3.00
8 $ 12.00 $ 26.00 $ 38.00 $ 1.50 $ 3.25
9 $ 12.00 $ 32.00 $ 44.00 $ 1.33 $ 3.56
10 $ 12.00 $ 39.00 $ 51.00 $ 1.20 $ 3.90
11 $ 12.00 $ 47.00 $ 59.00 $ 1.09 $ 4.27

Characteristics of the Perfect Competition market structure

1.Large number of buyers and sellers
2.Price Taker
3.Homogeneous product
4.Full information
5.Ease of entry and exit to industry

The ultimate goal of the perfectly competitive market structure is to maximize the profit.
How this goal is attained. To make sure the marginal revenue equals to the marginal cost. But the p
Costs of Production and Profit Maximization Analysis for the Perfect Competitive Market
Structure
 Costs of Production and Profit Maximization Analysis for the Perfect Competitive Market
Structure

etitive Market Structure

Average
Total Marginal Market Price Marginal
Cost Cost Perfect Total Total Revenue
(ATC) (MC) Competition Revenue Profit (MR)
$ - $ - $ 6.00 $ - $ -12.00 $ -
$ 18.00 $ 6.00 $ 6.00 $ 6.00 $ -12.00 $ 6.00
$ 10.50 $ 3.00 $ 6.00 $ 12.00 $ -9.00 $ 6.00
$ 7.67 $ 2.00 $ 6.00 $ 18.00 $ -5.00 $ 6.00 MC=MR
$ 6.00 $ 1.00 $ 6.00 $ 24.00 $ - $ 6.00
$ 5.20 $ 2.00 $ 6.00 $ 30.00 $ 4.00 $ 6.00
$ 4.83 $ 3.00 $ 6.00 $ 36.00 $ 7.00 $ 6.00
$ 4.71 $ 4.00 $ 6.00 $ 42.00 $ 9.00 $ 6.00
$ 4.75 $ 5.00 $ 6.00 $ 48.00 $ 10.00 $ 6.00
$ 4.89 $ 6.00 $ 6.00 $ 54.00 $ 10.00 $ 6.00
$ 5.10 $ 7.00 $ 6.00 $ 60.00 $ 9.00 $ 6.00
$ 5.36 $ 8.00 $ 6.00 $ 66.00 $ 7.00 $ 6.00

e the profit.
marginal cost. But the price must above the cost, otherwise the company have to quit the market because the
 Costs of Production and Profit Maximization Analysis for the Perfect Competitive Market
Structure

MC=MR

it the market because they can't make the profit in this situation.