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Mod9 av2

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  • 1. Module 9A OUTPUT AND PRICE UNDER PERFECT COMPETITION OBJECTIVE: This model determines the optimal level of output for a firm operating in a perfectly competitive environment (i.e. it is faced by a horizontal demand curve and can sell as much as it wants at the prevailing market price). The table displays total revenues and costs as well as average and marginal revenues and costs. The point at which profits are maximized is easily identified. The "shut-down" point can also be obtained. INPUTS (will appear in blue): The following inputs must be supplied: 1) Quantity produced (up to thirteen inputs): cells A34 to A46 2) a. Price per unit: cell B48, b. Fixed cost per period: cell D48 3) Three total cost coefficients (TC = aQ - bQ^2 + cQ^3) a) 1st power: cell D50 b) 2d power: cell F50 c) 3d power: cell H50 (The caret ^ signifies an exponent: x^2 is x squared.) GRAPH: To view graph, press GRAPH ( located at the bottom of the screen). It shows price (since the demand curve is horizontal, price, average revenue and marginal revenue are identical), average variable cost, average total cost and marginal cost. Sample data have been entered as an example. TOTAL TOTAL TOTAL FIXED VAR. TOTAL QUAN. PRICE REVENUE COST COST COST PROFIT TR-TVC 8 50.00 400.00 100.00 339.20 439.20 -39.20 60.80 9 50.00 450.00 100.00 369.90 469.90 -19.90 80.10 10 50.00 500.00 100.00 400.00 500.00 0.00 100.00 11 50.00 550.00 100.00 430.10 530.10 19.90 119.90 12 50.00 600.00 100.00 460.80 560.80 39.20 139.20 13 50.00 650.00 100.00 492.70 592.70 57.30 157.30 14 50.00 700.00 100.00 526.40 626.40 73.60 173.60 15 50.00 750.00 100.00 562.50 662.50 87.50 187.50 16 50.00 800.00 100.00 601.60 701.60 98.40 198.40 17 50.00 850.00 100.00 644.30 744.30 105.70 205.70 18 50.00 900.00 100.00 691.20 791.20 108.80 208.80 19 50.00 950.00 100.00 742.90 842.90 107.10 207.10 20 50.00 1000.00 100.00 800.00 900.00 100.00 200.00 Price 50.00 Fixed cost 100.00 Cost coefficients 60.00 3.00 0.10
  • 2. REMEMBER: Price per unit: cell B48, b. Fixed cost per period: cell E48 Three total cost coefficients (TC = aQ - bQ^2 + cQ^3) a) 1st power: cell D50 b) 2d power: cell F50 c) 3d power: cell H50 AVER. AVER. AVER. AVER. MARG. FIXED VAR. TOTAL MARG. MARG. QUAN. REV. REV. COST COST COST COST PROFIT 8 50.00 12.50 42.40 54.90 9 50.00 50.00 11.11 41.10 52.21 30.70 19.30 10 50.00 50.00 10.00 40.00 50.00 30.10 19.90 11 50.00 50.00 9.09 39.10 48.19 30.10 19.90 12 50.00 50.00 8.33 38.40 46.73 30.70 19.30 13 50.00 50.00 7.69 37.90 45.59 31.90 18.10 14 50.00 50.00 7.14 37.60 44.74 33.70 16.30 15 50.00 50.00 6.67 37.50 44.17 36.10 13.90 16 50.00 50.00 6.25 37.60 43.85 39.10 10.90 17 50.00 50.00 5.88 37.90 43.78 42.70 7.30 18 50.00 50.00 5.56 38.40 43.96 46.90 3.10 19 50.00 50.00 5.26 39.10 44.36 51.70 -1.70 20 50.00 50.00 5.00 40.00 45.00 57.10 -7.10
  • 3. OUTPUT VS PRICE UNDER PERFECT COMPETITION 60.00 50.00 40.00 $ PER UNIT 30.00 20.00 10.00 0.00 8 9 10 11 12 13 14 15 16 17 18 19 20 QUANTITY Column B Column C Column E Column F Column G

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