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You are operating a firm in a perfectly competitive market. In the short run, you have fixed costs of $30. Your variable costs are given
You are operating a firm in a perfectly competitive market. In the short run, you have fixed costs of $30. Your variable costs are given in the following table: Q TVC 0 10 70 120 3 150 4 190 15 270 6 360 Complete the following table: Profit maximizing Market Price Profit level of output $48 4 -28 $52 4 -12 $75 5 75 5 125 Profit maximizing output: For a perfect competitive firm profit maximizing output is achieved when its Price equals to MC. P= MC For $48 market price, if we look at matching MC in table 1 output 2 with MC 50 and output 4 with MC 40 are closer to $48. MC at 2nd unit is more closer to $48, but we select MC at 40 at 4th unit this is because the MC at 2nd unit is declining, while the MC 4th unit is rising. So output 4 is the profit maximizing output for price $48. Similarly different output levels are chosen at different given prices. Profit: for finding the profit, we have to calculate the corresponding total cost and total revenue. At 4th unit TC is 220 and TR is calculated by multiplying price x number of units. Profit = TR- TC
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