Question
a) Explain the profit maximisation strategy for perfectly competitive firm. (2 marks) b) A perfectly competitive firm (Top Pizza) is selling pizza in Sydney market
a) Explain the profit maximisation strategy for perfectly competitive firm. (2 marks) b) A perfectly competitive firm (Top Pizza) is selling pizza in Sydney market whose marginal cost (MC), average variable cost (AVC), and average total cost curves (ATC) are shown in the diagram below,
Price $/sliceMCATCAVC
2.5
2 1.8
1.6 1.2
250400Q slices/day
a. Determine the profit-maximising level of output at a price of $2.50 using the above diagram. (1 mark) b. At the profit maximising level of output, calculate how much profit will this producer earn if the price of pizza is $2.50 per slice? (2 marks)
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