Perfect Competition: Profit Maximization (Problem #1)

which of the following is the best example of a perfectly competitive industry? This is a topic that many people are looking for. star-trek-voyager.net is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, star-trek-voyager.net would like to introduce to you Perfect Competition: Profit Maximization (Problem #1). Following along are instructions in the video below:

“In this video. I will show you how to solve a perfect competition profit maximization maximization problem in perfect competition as you may know. It is a market characterized by buyers and sellers. These sellers produce an identical product.

And there is freedom of entry and exit into the market in this market. I m assuming that the market price. The equilibrium price is eight dollars and we have a firm with a total. Cost structure given by 40.

Plus. 05. Q plus. 005.

Q. Squared..


This lowercase. Q. Just represents the output of the firm. So in this problem.

Let s go ahead and find the ideal amount of output that this firm would produce that is the firm s profit profit maximizing output level first thing we need to do is just recognize that in perfect competition profit maximization requires that the firm produce the amount of output consistent. Where the price equals the marginal cost we have the price it s 8. What we don t have is marginal cost we can find marginal costs from the total cost equation marginal cost is going to be the derivative of the total cost equation with respect to output. So we re going to take the derivative of this right here.

And we re going to get back point five plus point. 1q. Now just rewriting once more marginal cost is 05. Plus point 1q in all we need to do is plug your information into this profit.

Maximizing. Condition price equals marginal..


Cost setting 8 equal. To. 05. Plus.

01. Q. Go ahead. And solve.

This get. 01. Q. Equals.

75. Q..


Equals. 75. For this firm. The maximize profits.

This firm would produce 75 units and as a perfectly competitive firm you have no choice. But do charge the going market price of 8 let s go ahead calculate the firm s revenues and total cost then the firm s total revenues for that matter. Any firm s total revenue will always given by price times quantity in our example. The market price is 8.

The the quantity that the firm produces is 75. We get a total revenue for this firm of 600 for total cost we take the total cost equation. And what we re going to do is we re going to evaluate that total cost equation at the number of units about with the firm s producing 75 and in this. Case we get total.

Cost. Equals..


350. 875. The firm s. Profit is total.

Revenue minus total. Cost. So. 600.

Nice. 350. 875. The firm has profit in this example of two hundred and forty one dollars and twenty five cents.

Okay thank you ” ..

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