Assignment No. 9: Short Run-Profit Maximization by a Perfectly Competitive Firm

Assignment No. 9: Short Run-Profit Maximization by a Perfectly Competitive Firm (20 Points maximum, less 4 point penalty per day after the due date) (MLA)–MLA
Profit is found as total revenue (TR) minus total cost (TC). With that in mind, let us now consider the possible profits for the firm that we looked at in assignments 7 and 8, where the firm’s capital is fixed at 2 units and where the cost of capital is $40 per unit per period, while the cost of labor (or wage rate) is $30 per unit of labor per period and the firm has the following short run production function:
Labor:
0
1
2
3
4
5
6
7
8
9
Output:
0
6
24
60
120
170
210
240
260
270
Now, let us further assume that the firm is perfectly competitive (i.e., it is a price taker) and that it can sell each unit of the output that it produces for $3 [remember, for price takers, the price (P) is also the marginal revenue (MR)].
(a) Use this information set up a diagram (i.e., an excel chart) that shows total cost (TC) and total Revenue (TR) of the firm per period in the short run with the level of output on the horizontal axis.
(b) Also, use this information to then set up another diagram showing the firm’s short-run marginal cost (MC) and marginal revenue (MR) with quantities on the horizontal axis.
(c) Copy both your charts into a Word or pdf file that also has an essay on the profit of the firm along with some discussion on the nature of profit maximization for perfectly competitive firms.
Note that you must upload your answer as one single Word or pdf file that will be reviewed by Turnitin for originality.
Note that this essay assignment will be reviewed for originality using Turnitin. While you do not have to confirm to any particular citation style, all direct quotes must be identified by quotation marks, along with a citation that identifies the source of the quote in question:
ORIGINALITY:
The assignment must be your own original work and it must be written specifically for this class. The assignment will be checked for originality using turnitin.com. Any citation omissions will affect your assignment grade, but significantly plagiarized assignments will receive a grade of zero, with no exceptions and with no do-overs.
CITATIONS:
You must cite all your sources.
PROPER QUOTATIONS & QUOTATION MARKS:
You must use quotation marks, or else use indented blocks, to identify all quotations. It is OK to paraphrase and not use direct quotes only when your language is completely different from the original, but you must still give proper credit to your sources. It is not OK to just insert a few words of your own into another writer’s text and then appropriate it without using quotation marks.