On the firm\'s: profit maximising output choice under perfect competition House

Question

On the firm's: profit maximising output choice under perfect competition House of Hash sells please of in a competitive . A unit of output consists of one please of sad a cup of coffee. Harry has fived costs of $300 per month. The current price of a plate of is $9. Henry's costs of production are given in the table below. Before you complete the table, compare MR (which equals price) and MC and find Henry's profit maximizing level of output (compare MR and MC, if MRs-MC EXPAND production, if MR-MC contract production.) Complete the table for TC and ATC. Calculate Hanry's profit at each level of output and find the profit maximizing level of output. Compare your answer in the part to your answer in part a. Will we expect farm's to enter or exit the barbecue near industry? What should happen to prices in the long-run? Look carefully at the ATC curve. Do you see its U-shape? Now, a venture guess as to what Hanry's long-run maximizing price will be.

Explanation / Answer

a) for profit max. MR= MC , hence q at which MR=MC = 9 is near 550 (from incoplete table) , If MR > MC is means , there ar still chance of max. profit . MC> MR means u are occuring losses.

B )

here max. profit occur at Q= 550 , which is same as part a ).

d) since firm are earning profit , it will attract other firms to enter into market . and if free entry and exit is allowed then , in long run , all will have normal profit, with supernormal profit zero .

e) yes , ATC values first decreases and then increases , it is a U shape curve .

Q MC TVC TFC TC ATC TR Profit 0 300 300 0 -300 100 6.65 665 300 965 9.65 900 -65 150 6.9 1010 300 1310 8.733333 1350 40 200 7.15 1367.5 300 1667.5 8.3375 1800 132.5 250 7.4 1737.5 300 2037.5 8.15 2250 212.5 300 7.65 2120 300 2420 8.066667 2700 280 350 7.9 2515 300 2815 8.042857 3150 335 400 8.15 2922 300 3222 8.055 3600 378 450 8.4 3342.5 300 3642.5 8.094444 4050 407.5 500 8.65 3775 300 4075 8.15 4500 425 550 8.9 4220 300 4520 8.218182 4950 430 600 9.15 4677.5 300 4977.5 8.295833 5400 422.5 650 9.4 5147.5 300 5447.5 8.380769 5850 402.5 700 9.65 5630 300 5930 8.471429 6300 370

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