Market Forms

Assignment 2: Market Forms

Table 1

Output Average Fixed cost Average Variable Cost Average Total Cost Marginal Cost Price Total Revenue Marginal Revenue

0 $ 345.00

1 $ 180.00 $ 135.00 $ 315.00 $315.00 $ 300.00 $300.00 $300.00

2 $ 90.00 $ 127.50 $ 217.50 $98.00 $ 249.00 $498.00 $198.00

3 $ 60.00 $ 120.00 $ 180.00 $38.00 $ 213.00 $639.00 $141.00

4 $ 45.00 $ 112.50 $ 157.50 $23.00 $ 189.00 $756.00 $117.00

5 $ 36.00 $ 111.00 $ 147.00 $11.00 $ 165.00 $825.00 $69.00

6 $ 30.00 $ 112.50 $ 142.50 $5.00 $ 144.00 $864.00 $39.00

7 $ 25.71 $ 115.70 $ 141.41 $1.00 $ 126.00 $882.00 $18.00

8 $ 22.50 $ 121.90 $ 144.40 $3.00 $ 111.00 $888.00 $6.00

9 $ 20.00 $ 130.00 $ 150.00 $6.00 $ 99.00 $891.00 $3.00

10 $ 18.00 $ 139.50 $ 157.50 $8.00 $ 87.00 $870.00 -$21.00

• Using the data in the table and on your graph, explain the profit maximizing, or loss minimizing level of output.

The profit maximizing output is determined by balancing marginal costs and marginal revenue. The intersection point is what a firm will use determine what they decide to produce. Price is greater than average total cost in this instance. Loss minimizing is when the average total cost is greater than the price, and the price is greater than the average variable cost. Profit maximizing output would be 3 units; loss minimizing output would be 1 unit. Argosy University Online. (2015).

• 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.

Normal profit is making enough money for a business to keep operating and competing within in its realm, or when revenues equal costs. Economic profit is when revenues exceed costs. Economic profits are present for...