Calculating total revenue, total cost also profit for a given perfect competitive industry.
Perfect Competition
The following table represents the hourly output also cost structure for a local pizza shop. The marketplace it perfectly competitive also the marketplace price of a pizza in the area is $10. Total costs include all explicit also implicit costs.
|
Output
|
Total Costs
|
|
0
|
$5.00
|
|
1
|
$9.00
|
|
2
|
$11.00
|
|
3
|
$12.00
|
|
4
|
$14.00
|
|
5
|
$18.00
|
|
6
|
$24.00
|
|
7
|
$32.00
|
|
8
|
$42.00
|
|
9
|
$54.00
|
|
10
|
$68.00
|
a) Compute the total revenue also total economic profit at every level of output.
b) Compute the pizza shop's marginal costs also marginal revenue level of output. Illustrate what is the profit maximizing rate of output for the pizza shop?
c) Draw a marketplace supply also demand diagram for pizza alongside a corresponding representative industry graph for the pizza shop. With respect to the representative industry graph, label the areas which represent total revenue, total costs also profit. (For simplicity, only draw the average total cost curve; you need not draw the average variable cost curve.)
d) Now in another set of side by side graphs, explain how the adjustment which takes place in the long run in both the marketplace graph also the corresponding graph for the representative industry. Elucidate your answer.