Practical exercise:

You are an Economist and studied Business Administration. On June 25, 2022, you apply for a job at a company inserted in the perfect competition market and to cover the profile you must put into practice your knowledge as an economist on issues related to said company:

Problem:

There is a perfectly competitive market, with the following supply and demand functions:

Supply p = x + 8

Demand p = -3x + 56

Likewise, in said market there is a profit-maximizing company, which has the following total cost function:

TC(x) = x² + 4x + 1

Based on your knowledge, calculate:

1. What should the equilibrium market price be?

In perfect competition, the game between market supply and demand is essential to obtain the price at which said product will be sold and bought.

2. What must be the quantity that the profit-maximizing firm will produce?

In perfect competition, the participants are price takers, that is, they cannot exert influence over the price at which it is traded, therefore, for the maximizing company:

• Profit = Total revenue - Total Costs
• Profit = (Price)(Quantity) - Total Costs
• Profit = Price-Marginal Cost
• Price=Marginal Cost

3. What should be the benefit that it will obtain?

Once the amount that the company will produce has been calculated, the profit that it will obtain is calculated as follows:

Profit = Total revenue - Total Costs

4. What should be the unit profit of the company.

5. How much are the fixed and variable costs of the company.

6. How much are the average fixed and variable costs of the company.

7. How much is the average cost of the company?

Profit Maximization Costs A and The firm maximizes Revenue profit by producing the quantity at which MC marginal cost equals marginal revenue. MC. ATC P = MRI = MR = AR = MR MC 0 QMAX Quantity Profit ($) 0