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Case Study: Profit Maximization In Perfect Competition Market

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.

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.