Assignment: Profit Maximization Under Perfect Competition
1. Profit-Maximization Table for a Market Gardener
P ($ per
kg)
Q (kg per TR ($)
month)
TC ($)
0
$18
$0
MR ($
per kg)
100
$48
200
$96
300
$144
$0.48
400
$192
$0.48
500
$240
$0.48
600
$288
$0.48
700
$336
$0.48
800
$384
$501
$67
$0.265
$86
$0.29
$95
$0.332
$89
$0.42
$42
$0.23
$294
$0.48
$0.2567
$0.23
$199
$0.48
$39
$0.23
$145
$0.48
$0.285
$0.23
$106
$0.48
$7.00
$0.23
$77
$0.48
$0.41
$0.23
$57
$0.48
$0.48
Profit/Loss
($)
$0.23
$41
$0.48
$0.48
AC ($
per kg)
–$18
$0.48
$0.48
MC ($
per kg)
$0.23
$0.626
-$117
2. Show how you know this firm is operating in a perfectly competitive market. (5)
3. Determine the firm's profit-maximizing output (to the nearest 100 kg) using both the TRTC and MR-MC methods. (Be sure to show your calculations, not just the answers) (10)
4. Now solve the profit-maximizing output problem graphically using both methods. (10)