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Perfect vs imperfect competition

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The following information is available about a firm:

Output 0 1 2 3 4 5 6 7 8
Total Revenue - 30 60 9 120 150 180 210 240
Total Costs 70 100 122 135 140 145 154 179 220

a) Is the firm producing under perfect or imperfect competition? Explain.
b) What are its fixed costs?
c) What is the marginal revenue?
d) Calculate the marginal cost at all output levels.
e) State what output will the firm produce and explain why.
f) What is the market price?
g) What is its profit?

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Solution Preview

a) In perfect competition, if a firm that changes the quantity it sells, this does not affect prices. In imperfect competition, a firm can change prices by changing its output. From the chart, we see that the marginal revenue (MR) is 30 for each unit, regardless of how many units sell. Since the marginal revenue equates to the ...

Solution Summary

This solution gives step-by-step calculations and accompanying descriptions for determining a firm's fixed costs, marginal revenue, marginal costs, market price and factors affecting its output, as well as providing an explanation that delineates if the firm is producing under perfect or imperfect competition.

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