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Perfect competition and monopoly comparison using specific examples that include ATC, Quantity sold, price, MC, MR, etc.

(1) Global Investment Group operates in a perfectly competitive industry with the following Cost and Revenue data:

Average Total Cost = $2.50; Quantity sold = 9000 Units; Price Per Unit = $3.50; Marginal Revenue = $3.50; Marginal Cost = $3.50:

(a) What is the loss minimizing output level for the firm?

(b) What is the Average Profit or Loss for the firm?

(c) What is the Total Profit or Loss for the firm?

(2) Global Marketing Group operates in a monopolistic competitive industry with the following Cost and Revenue data:

Average Total Cost = $5.00; Quantity sold = 5000 Units; Price Per Unit = $9.00; Marginal Revenue = $4.00; Marginal Cost = $4.00:

(a) What is the profit maximizing output level for the firm?

(b) What is the Average Profit or Loss for the firm?

(c) What is the Total Profit or Loss for the firm?

Solution Preview

(1) Perfectly competitive firm:

(a) The loss minimizing/profit maximizing output is to produce where MC = P = MR, that is, in this case at $3.50. That means that it is operating at the loss minimizing/profit maximizing output. And at that point, output ...

Solution Summary

Using simple, step by step solutions and calculations, this solution provides answers to all the problems, including output, profit, etc.

$2.19