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    Case Study: Profit Maximization In Perfect Competition Market

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    Solving a Numerical or Profit Maximization in Perfect Competition

    Introduction: Firm PQR produces a product 'Alpha' under perfect competition market conditions. The cost function for the firm is:
    TC = 1500 + 200 Q + Q2

    The market supply and demand equations for the product 'Alpha' in the perfect competition market are:
    QS = 40,000 + 60 P
    QD = 80,000 - 40 P

    Task: Based on the information given above, calculate:

    a. The profit maximizing output for PQR.
    b. The economic profits earned by PQR.
    c. Is the industry for product 'Alpha' in equilibrium?

    Please provide a step-by-step calculation to show how you arrived at the answer.

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    Solution Preview

    a. For profit maximization in perfect competition we have P=MC
    P from demand and supply equation we have 40000+60P=80000-40P
    Solving we get P=400
    Now calculate the ...

    Solution Summary

    Step by step solution of all given problems.