Assignment 2: Market Forms
Assignment 2 Market Formsfor This Assignment You Will Do A Signican
For this assignment you will do a significant portion of work in MS Excel and import it into an MS Word document for submission. You will use the data below to address price and output decisions faced by firms that are not in pure competition. Some numbers may be rounded.
Table 1
| Output | Average Fixed Cost | Average Variable Cost | Average Total Cost | Marginal Cost | Price | Total Revenue | Marginal Revenue |
|---|---|---|---|---|---|---|---|
| 0 | $345.00 | $180.00 | $135.00 | $315.00 | $300.00 | $90.00 | $127.50 |
| 249 | $60.00 | $120.00 | $180.00 | $213.00 | $45.00 | $112.50 | $157.50 |
| 189 | $36.00 | $111.00 | $147.00 | $165.00 | $30.00 | $112.50 | $142.50 |
| 144 | $25.71 | $115.70 | $141.41 | $126.00 | $22.50 | $121.90 | $144.40 |
| 111 | $20.00 | $130.00 | $150.00 | $99.00 | $18.00 | $139.50 | $157.50 |
| 87 | $18.00 | $139.50 | $157.50 | $87.00 |
Address the following: Complete Table-1. Summarize your calculations. Prepare a graph showing : Average Fixed Costs, Average Variable Costs, Average Total Costs, Marginal Revenue, Marginal Costs. Using the data in the table and on your graph, explain the profit-maximizing or loss-minimizing level of output. Define a normal profit and an economic profit. Are normal profits being earned in this example? Are economic profits present for this firm in this example? Explain your answers. Given the data in the table and the graph, what type of market structure could this be in the short run? Explain your answers. If the data in Table-1 represents the long run, what type of firm must this data represent? Explain your answers.
Paper For Above instruction
The analysis of market structures and firm behavior in different economic contexts is fundamental to understanding how businesses operate and make decisions regarding output, pricing, and profitability. This paper explores the data provided, focusing on cost and revenue measures, to identify the profit-maximizing output, the nature of profits, and the market structure in which the firm operates, distinguishing between short-run and long-run scenarios.
Initially, completing Table 1 requires calculating missing values based on provided data. For example, since average fixed costs (AFC) are derived from total fixed costs divided by output, and assuming fixed costs are constant in the short run, the AFC decreases as output increases. Similarly, average variable costs (AVC) are obtained by dividing total variable costs by output, and average total costs (ATC) are their sum. Marginal costs (MC) are evaluated by observing changes in total costs with each additional unit produced.
Using the data, we can plot the costs and revenue curves. The graph should display AFC, AVC, ATC, MR (marginal revenue), and MC to visually identify the point where marginal costs equal marginal revenue—this point indicates the profit-maximizing level of output. Analysis of the data reveals that the firm maximizes profit when marginal cost equals marginal revenue. At this output level, if total revenue exceeds total cost, the firm earns an economic profit; if not, the firm incurs a loss.
A normal profit represents a situation where total revenue equals total costs, including opportunity costs—this occurs when economic profit is zero. An economic profit, on the other hand, occurs when total revenue exceeds total costs, indicating efficient operation and possibly entry or exit signals in the market.
In this scenario, the firm appears to earn normal profits if total revenue just covers total explicit and implicit costs, or economic profits if revenue exceeds total costs, signifying market competitiveness or profitability in the short run. The data suggests that the firm may be earning positive economic profits at certain output levels, especially if prices are above the average total cost.
The pattern of costs and revenue aligns with characteristics of monopolistic competition or imperfect competition in the short run—market structures where firms have some pricing power but face competition that prevents sustained economic profits in the long run. If the data extended into the long run, zero economic profits would be expected due to entry and exit dynamics, resulting in firms operating where price equals average total cost.
Therefore, the short-run data most likely reflects a monopolistic or imperfectly competitive market structure, where firms can earn short-term profits but face pressure toward normal profits in the long run. The long-run equilibrium would show firms producing at the minimum of the ATC curve, with price equal to the average total cost, indicating a perfectly competitive or long-run equilibrium scenario.
References
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