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    Determining profit maximizing output level

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    (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?

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    Solution Preview

    Solution:

    (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?
    For profit maximization or loss minimization MR=MC=P
    In the given case MR=MC=P=$3.50
    So, we can say that ...

    Solution Summary

    Solution describes the steps for calculating profit maximizing output level for perfectly competitive and monopolistic competitice firms. It also calculate profit at this level.

    $2.19