Question

Complete a table for Q, FC, VC, TC, MC, MR, Price, TR and Profit using reasonable numbers for a perfectly competitive firm. For price, use a number equal to the number of letters in your first and last name (maximum 18).My first and last name is Maria Cisneros. For Q use 0, 1, 2, 3, 4, 5, 6, 7, 8 For MC use $3, 4, 5, 7, 9, 13, 16, 21. Then make up numbers for FC, VC, TC, MR but make certain that they correspond to the numbers you already used for Price and MC. Then find and show the profit maximizing level of output showing that it is where MR = MC. (okay if your quantity is in between two numbers). You may need to play around with the numbers to make this work out. What was the one most important concept you learned in the readings on costs of production and competitive markets? In a one page essay, summarize this concept, explain how it changed your prior understanding, and show that this concept is important by applying it to a real life situation. Please make certain that this essay is based on your own understanding, not the understanding of someone else you found on the internet. Based on your own experience, describe a business that is quite competitive. Which of the criteria for a perfectly competitive firm are met by this business—and which are not? (Identical products; price taker; low economic profits) For this business give examples (description of the cost; no dollar amount needed) of the following and explain why they are examples of this type of cost Explicit fixed cost Explicit variable cost Implicit fixed cost Implicit variable cost.

Answer 1

Ans: Complete Table

Q	Price	VC	FC	TC	MC	MR	TR	Profit
0	16	0	10	10	-	-	-	-10
1	16	3	10	13	3	16	16	3
2	16	7	10	17	4	16	32	15
3	16	12	10	22	5	16	48	26
4	16	19	10	29	7	16	64	35
5	16	28	10	38	9	16	80	42
6	16	41	10	51	13	16	96	45
7	16	57	10	67	16	16	112	45
8	16	78	10	88	21	16	128	40

The price is fixed at 16$ (number of letters of the first and last name)

Total Cost = Variable Cost + Fixed Cost

Marginal Revenue = Price

Total Revenue = Price * Quantity

Profit = Total Revenue - Total Cost

Profit Maximising quantity is &, where MR=MC.

In the above schedule of Perfect competition, the price of the firm is constant even when the quantity is increasing. The price is constant which shows that the firm is a price taker. Fixed Costs are the cost incurred by the firm even when the production is not happening. The fixed cost is constant in the short run and cant be changed.  The total cost of the firm includes both fixed cost and variable costs. Marginal Cost is the additional cost incurred by the firm to produce one more unit of the good. In the case of a perfectively competitive market marginal revenue, and the price is equal and constant. It is with the help of the TR and TC, the profit of the firm is calculated and production decisions are made. The profit-maximizing point is at 7 units where the MR=MC. Beyond this point, it can be seen that the profits are decreasing. From the above table it can be seen that, in this perfectly competitive market, as the firm produces more quantities of output, the TR increases steadily at a constant rate at the given price level. When the TR exceeds TC, the firm incurs a profit and when the TC exceeds the TR, the firm incurs a loss. In the above business, it shows the properties of a perfect competition like the features of a price taker, homogenous goods, higher number of producers and consumers etc.