Cost And Revenue
A firm operating in perfect competition has no influence over market price. It can sell any amount at the market-clearing price. The only one major decision to make then is about what quantity should be produced. When it decides the quantity to produce, then this quantity—along with the prices prevailing in the market for output and inputs—will determine the firm’s total revenue, total costs, and ultimately, level of profits.
For the Costs and Revenue in Perfect Competition Assignment, you will submit an MS Excel spreadsheet and a paper (word document) in Waypoint.
In the Costs and Revenue in Perfect Competition Template Download Costs and Revenue in Perfect Competition Template(MS Excel), fill in the missing values in the given table.
Make sure to use the "formula" feature.(The numbers in the table change. So, if you don't use the "formula", your answers will be incorrect because of the changing numbers.) Please refer Excel Formulas and Functions TutorialLinks to an external site. for guidance.
Calculate marginal cost (MC), marginal revenue (MR), average fixed cost (AFC), average variable cost (AVC), and average total cost (ATC).
Graph all the cost curves and the MR curve.
Find the profit-maximizing price and output.
Calculate the profit (or loss).
In your paper, based on the readings for the week and your calculations in the worksheet, answer the following question:
Explain if the firm should remain open or temporarily shut down when the price drops to $10.
Discuss why firms in perfectly and monopolistically competitive markets stay in business despite having zero economic profit in the long run.
The Costs and Revenue in Perfect Competition paper
Sample Solution
1. Completing the Excel Template:
- I'll provide the formulas for MC, MR, AFC, AVC, and ATC, ensuring accuracy even with changing numbers.
- I'll guide you on appropriate graphing techniques to visualize the cost curves and MR curve.
- I'll assist in identifying the profit-maximizing price and output levels.
- I'll help you calculate the resulting profit or loss.
2. Addressing the Paper Prompts:
- Should the firm remain open at $10? I'll provide a detailed analysis based on the shutdown rule, comparing AVC and price to determine the optimal decision.
Full Answer Section
- Why zero economic profit in long-run? I'll delve into the concepts of economic profit vs. accounting profit, free entry and exit, and the role of opportunity costs in perfectly and monopolistically competitive markets to explain why firms persist even with zero economic profits.
To ensure the most effective assistance, please:
- Share the specific formulas and data from the Excel template.
- Describe any challenges or questions you have regarding the calculations or interpretations.
- Provide any relevant details from your readings or course materials.
I'm committed to providing comprehensive explanations and insights to help you successfully complete this assignment. Feel free to ask any questions or provide additional information you need.