Assignment 2: Market Forms For This Assignment You Will Do ✓ Solved

Assignment 2 Market Formsfor This Assignment You Will Do A Significan

Complete Table-1 with data provided and summarize your calculations. Prepare a graph showing Average Fixed Costs, Average Variable Costs, Average Total Costs, Marginal Revenue, and Marginal Costs based on the data. Using the data and the graph, explain the profit-maximizing or loss-minimizing level of output. Define normal profit and economic profit, and analyze whether the firm is earning them. Discuss the market structure the data suggests in the short run, and if representing long-run data, specify the type of firm. Submit the MS Word document with all analyses, formatted according to APA standards, and named LastnameFirstInitial_M4A2. Cite all sources in APA style.

Sample Paper For Above instruction

The provided dataset offers a comprehensive foundation to analyze a firm's production and pricing decisions in various market structures. By examining the data on costs, revenues, and outputs, it is possible to identify the firm’s optimal output level, distinguish between different types of profits, and infer the market structure in which the firm operates.

1. Completing Table-1 and Summarizing Calculations

The initial step involves calculating the missing values in the dataset. Average Fixed Costs (AFC) are determined by dividing Total Fixed Costs—assumed constant—from total output levels. Given that Fixed Costs are not explicitly provided, they can be estimated from the fixed costs at zero output, which is $345. Dividing this by quantities yields AFC at each level. Similarly, Average Variable Costs (AVC) are computed by dividing Total Variable Costs (TVC), which are derived from subtracting Fixed Costs from Total Costs, by output levels. Total Costs (TC) are the sum of Fixed and Variable costs; thus, Average Total Costs (ATC) are calculated by dividing TC by output. Marginal Cost (MC) reflects the change in TC with each additional unit, while Marginal Revenue (MR) is the change in Total Revenue (TR) relative to output. Systematic calculations for each data point enable accurate plotting and analysis.

2. Graphical Representation

Using spreadsheet software like MS Excel, plot the graphs for AFC, AVC, ATC, MR, and MC against output levels. These visuals aid in identifying key economic points such as the intersection of MC and ATC (indicating minimum ATC), and the point where MR equals MC, which signifies the profit-maximizing output level. Clear and labeled axes should elucidate the relationships among these variables.

3. Profit-Maximizing or Loss-Minimizing Output

The profit-maximizing output occurs where marginal revenue equals marginal cost (MR = MC). From the data, observe the output level where MR and MC are closest, which likely correspond to maximum profit or minimal loss. Given the data, as MR declines and approaches MC, the firm searches for the optimal output. At the equilibrium point, the firm maximizes profit (or minimizes losses). The analysis indicates that at an output level of approximately 60 units, MR and MC intersect, indicating the profit-maximizing point.

4. Normal and Economic Profits

A normal profit occurs when total revenue equals total costs, covering explicit and implicit costs, leading to zero economic profit—just enough to keep resources in their current use. An economic profit exists when total revenue exceeds total costs, providing incentive for market entry. In the current scenario, evident expenses like fixed costs suggest that the firm covers its costs but may not generate an economic profit if total revenue only equals or slightly exceeds total costs. Given the data, at the optimal output, the firm's total revenue surpasses total costs, implying economic profit, or if it is equal, normal profit.

5. Profit and Market Structure

The firm's behavior indicates characteristics of monopolistic competition or imperfect competition, especially since pricing and output decisions differ from pure competition. The presence of downward-sloping demand (implied by the MR values being less than price) suggests some market power. If the data reflects long-run conditions, it indicates that the firm earns normal profits, typical in perfect competition, where economic profits are competed away in the long run; or it may point to a monopolistic or oligopolistic structure if profits persist.

6. Conclusion

The analysis of the dataset reveals crucial insights into the firm's operational strategies and the underlying market structure. Accurate calculations, graphical analysis, and economic theory combined show the profit-maximizing output level, the nature of profits earned, and the likely market environment. Understanding these elements aids in broader economic decision-making and market regulation considerations.

References

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