Costs of Production and Profit Maximization Analysis for the Perfect Competitive Market

Total
Fixed
Costs
(TFC)
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10

Total
Output/hr
0
1
2
3
4
5
6
7
8
9
10
11

Total
Variable
Costs
(TVC)
$0
7
10
12
13
15
18
22
27
33
40
48

Average Average Average

Fixed
Variable
Total
Marginal
Costs
Costs
Costs
Costs
(AFC)
(AVC)
(ATC)
(MC)
10
0
0
0
0
17
17.00
7
9
10
19.00
3
0
7
7.33
2
0
6
5.75
1
0
5
5.00
2
0
5
4.67
3
0
5
4.57
4
0
5
4.63
5
0
5
4.78
6
0
5
5.00
7
0
5
5.27
8

Total
Costs
(TC)
$10
$17
$20
$22
$23
$25
$28
$32
$37
$43
$50
$58

Measuring Total Profits

20
15
10 Cost per Unit
Price and
5
0

10

11

12

Output
Average Total Costs (ATC)

Marginal Costs (MC)

Market Price Perfect Competition

Marginal Revenue (MR)

Average Costs of Production

20
18
16
14
12
10Costs
Production
8
6
4
2
0
1
2

10

11

Output
Average Fixed Costs (AFC)

Average Variable Costs (AVC)

Average Total Costs (ATC)

Marginal Costs (MC)

12

6
4
2
0

10

11

12

Output
Average Fixed Costs (AFC)

Average Variable Costs (AVC)

Average Total Costs (ATC)

Marginal Costs (MC)

Profit Maximization

$70
$60
$50
$40

Revenue and Costs

$30
$20
$10
$0

Output

Total Costs (TC)

10

11

12

Total Revenue

Chart Title
$70
$60
$50
$40

Costs $30
$20
$10
$0

10

11

12

Output
Total Fixed Costs (TFC)

Total Variable Costs (TVC)

Total Costs (TC)

1. As shown in the table, this is the point when profits are at a max. A firm in the
perfect competition has a set price. How much that firm produces at the set price
can lose or gain them money. Thats what the profit maximizing point is for. At that
point it will indicate to a firm how much product to produce. What the firm then
does is hires people until that point is reached.
2. There is no profit maximizing point when the prices go to $4.25
3. Because the costs are greater than the revenues at every point in the table, it
would probably be best for the company to shit down. Or outsource.

2. There is no profit maximizing point when the prices go to $4.25

3. Because the costs are greater than the revenues at every point in the table, it
would probably be best for the company to shit down. Or outsource.

mpetitive Market Structure

Market Price
Perfect
Total
Competition Revenue
$5
$0
$5
$5
$5
$10
$5
$15
$5
$20
$5
$25
$5
$30
$5
$35
$5
$40
$5
$45
$5
$50
$5
$55

Total
Profit
($10)
($12)
($10)
($7)
($3)
$0
$2
$3
$3
$2
$0
($3)

Marginal
Revenue
(MR)
5
5
5
5
5
5
5
5
5
5
5
5

Monopoly Profit Maximizing Analysis

Price Per
Total
Unit
Total
Output (Demand Revenue
Units
)
(TR)
0
$8.00
0.00
1
$7.80
7.80
2
$7.60
15.20
3
$7.40
22.20
4
$7.20
28.80
5
$7.00
35.00
6
$6.80
40.80
7
$6.60
46.20
8
$6.40
51.20
9
$6.20
55.80
10
$6.00
60.00
11
$5.80
63.80
12
$5.60
67.20

Total
Costs
(TC)
10.00
14.00
17.50
20.75
23.80
26.70
29.50
32.25
35.10
38.30
42.70
48.70
57.70

Average
Total
Marginal Marginal
Costs
Costs Revenue
(ATC)
(MC)
(MR)
0.00
0
0
14.00
4.00
7.80
8.75
3.50
7.40
6.92
3.25
7.00
5.95
3.05
6.60
5.34
2.90
6.20
4.92
2.80
5.80
4.61
2.75
5.40
4.39
2.85
5.00
4.26
3.20
4.60
4.27
4.40
4.20
4.43
6.00
3.80
4.81
9.00
3.40

Total
Profit
(TP)
-10.00
-6.20
-2.30
1.45
5.00
8.30
11.30
13.95
16.10
17.50
17.30
15.10
9.50

Monopoly Profit Determination

$16.00
$14.00

Demand
Price

$12.00
$10.00

Costs

$8.00
$6.00

Average Total C

$4.00
$2.00
$0.00

10

11

12

13

Output
Price Per Unit (Demand)

Average Total Costs (ATC)

Marginal Costs (MC)

Marginal Revenue (MR)

Revenue - Cost Comparison

80.00
70.00
60.00
50.00

Total Costs and Total Revenue

40.00
30.00
20.00
10.00
0.00

Output

10 11 12 13

50.00

Total Costs and Total Revenue

40.00
30.00
20.00
10.00
0.00

10 11 12 13

Output
Total Revenue (TR)

Total Costs (TC)

1. The same is true for the firm in a competitive market as it is for a firm in a
monopoly. When MC=MR profit is the highest it will be. Anymore product
produced wouldn't benefit them as much.
2. First, the monopolist would have to find the profit maximizing point(MC=MR).
Then by making a graph or figuring what that price is, they can now settle on
how much to produce.
3. Producing more or less than the profit maximizing point. The maximum
amount of money is being made. The firm in the monoply keeps on producing
when the average total costs exceed that of the demand resulting in a lose of
profits.

Demand
Price
MC = MR
Average Total Costs