Purchase Solution

# Profit Maximization in Perfect Competition

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At a product price of \$41 will this firm produce in the short run? Why or why not? If it is preferable to produce, what will be the profit- maximizing or loss-minimizing output? Explain. What economic profit or loss will the firm realize per unit of output?

Total Average Average Average Marginal
Product Fixed Cost Variable Cost Total Cost Cost
0
1 \$60.00 \$45.00 \$105.00 \$45
2 30.00 42.50 72.50 40
3 20.00 40.00 60.00 35
4 15.00 37.50 52.50 30
5 12.00 37.00 49.00 35
6 10.00 37.50 47.50 40
7 8.57 38.57 47.14 45
8 7.50 40.63 48.13 55
9 6.67 43.33 50.00 65
10 6.00 46.50 52.50 75

##### Solution Summary

This solution uses an example to demonstrate calculations associated with profit maximization in a perfect environment. This also explains the short-run vs. long-run impact.

##### Solution Preview

Assuming perfect competition, the price of the product will be the Marginal Revenue. For profit maximization the company should then ...

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