## [answered] Background Profit maximization is the assumed goal of the f

Background

Profit maximization is the assumed goal of the firm. That is, the firm?s goal is to maximize profits subject to its costs. Market structures such as Competition, monopoly, monopolistic competition and oligopoly all have the goal of profit maximization and these markets can also be identified by their characteristics.

Table 1

 Characteristics Perfect Competition Monopoly Monopolistic Competition Oligopoly Few of sellers Identical Product Free entry & exit Long run zero economic profit Market power; ability to influence price & output Product differentiation Downward sloping demand curve Many sellers Single seller of product with no close substitutes Mutual interdependence & Strategic Pricing Price takers

Instructions: Table 1 above, contains distinguishing characteristics of four market structures covered in this course.

Question 1 Place an X in the column space provided that corresponds with each market structure. (Note, some characteristics may apply to more than one market structure).

(20 points)

.

Assessment codes CT, VC

Table 2

 Quantity Price Total Revenue Marginal Revenue Total Cost Marginal Cost 0 \$15 0 \$8 ---- 1 14 14 14 11 3 2 13 26 12 16 5 3 12 36 10 26 10 4 11 44 8 39 13 5 10 50 6 57 18

Question 2. Instructions. Answer the questions below

a) From Table 2 above, complete the missing values for total revenue (TR) Marginal revenue (MR,) and marginal cost (MC) (20 points)

b) From your completed table values in question a) above, find the profit-maximizing level of output. (10 points)

c) From Table 2 above, fully explain how the ATC (average total cost) data would enable you to find the per unit profit at the profit maximizing level of output. (10 points)

Assessment Codes CT, VC, WC & EQS,

Question 3 Instructions: Answer the graphing questions in the space below

a) From table 2, Graph price, quantity, marginal revenue and marginal cost curves.

(20 points)

b) What is price at the profit maximizing level of output (show on the graph)? (10 points)

c) Calculate the average total cost at all levels of output, and use the information to show the per unit profit at profit maximizing level of output. (10 points)

Assessment Codes CT, VC, EQS

Background

Profit maximization is the assumed goal of the firm. That is, the firm?s goal is to maximize

profits subject to its costs. Market structures such as Competition, monopoly,...

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