Micro Economics Essay

987 Words Feb 25th, 2015 4 Pages
QUESTION 1

Here is a company’s cost data:

|Output |FC |VC |TC |MC |ATC |AVC |
|1 |100 |30 |130 |0 |130 |30 |
|2 |100 |70 |170 |40 |85 |35 |
|3 |100 |120 |220 |50 |73,3 |40 |
|4 |100 |170 |270 |50 |67,5 |42,5 |
|5 |100
…show more content…
At this price, the company would make a total of 400 units.

How much profit would it make?

In this case, the company would make a profit of:

Profit: TR – TC

TR: P * Q = 60 * 400 = 24 000

TC: ATC * Q = 67,5 * 400 = 27 000

Profit: 24 000 – 27 000 = -3 000

QUESTION 2

Compare the market structures of perfect competition and monopolistic competition.

What are the main differences?

Monopolistic competition differs from perfect competition in the fact that production does not take place at the lowest possible cost. Because of this, firms are left with excess production capacity. Monopolistic competition is a type of competition within an industry where all firms produce similar substitutable products, all firms are able to enter the industry, all firms are profit maximizers and finally where all firms have some market power, which means none of them are price takers. Whereas perfect competition is a market structure where all the firms have to follow those five criteria: sell identical products, be price takers, have small market share, buyers have full knowledge, freedom of entry and exit.

Choose an industry with various producers. Draw a positioning map for these companies and explain how they differentiate their products.

I choose the chocolate industry because it is an industry where they a lot of different brands and different producers too. The…