Total

Output/hr
Total Fixed
Costs (TFC)
Total
Variable
Costs (TVF)
Total Costs
(TC)
Average
Fixed Costs
(AFC)
Average
Variable
Costs
(AVC)
Average
Total Costs
(ATC)
Marginal
Costs (MC)
0 $10 $0 10 0 0 0.00 --
1 $10 7 17 10 7 17.00 7
2 $10 10 20 5 5 10.00 3
3 $10 12 22 3 4 7.33 2
4 $10 13 23 3 3 5.75 1
5 $10 15 25 2 3 5.00 2
6 $10 18 28 2 3 4.67 3
7 $10 22 32 1 3 4.57 4
8 $10 27 37 1 3 4.63 5
9 $10 33 43 1 4 4.78 6
10 $10 40 50 1 4 5.00 7
11 $10 48 58 1 4 5.27 8
Costs of Production and Profit Maximization Analysis for the Perfect Competitive Market Structure
0
2
4
6
8
10
12
14
16
18
1 2 3 4 5 6 7 8 9 10 11
P
r
o
d
u
c
t
i
o
n

C
o
s
t
s

Output
Average Costs of Production
Average Fixed Costs
(AFC)
Average Variable Costs
(AVC)
Average Total Costs
(ATC)
Marginal Costs (MC)
$0
$10
$20
$30
$40
$50
$60
$70
D
o
l
l
a
r

C
o
s
t
s

30
40
50
60
70
R
e
v
e
n
u
e

a
n
d

C
o
s
t
s

Profit Maximization
Total Costs (TC)
Total Revenue
0
10
20
30
1 2 3 4 5 6 7 8 9 10 11 12
R
e
v
e
n
u
e

a
n
d

C
o
s
t
s
Output
Total Costs (TC)
Total Revenue
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
1 2 3 4 5 6 7 8 9 10 11
P
r
i
c
e

a
n
d

C
o
s
t

P
e
r

U
n
i
t

Output
Measuring Total Profits
Average Total Costs (ATC)
Marginal Costs (MC)
Marginal Revenue (MR)
Market Price
Perfect
Competition
Total
Revenue Total Profit
Marginal
Revenue
(MR)
$5 0 ($10) --
$5 5 ($12) 5
$5 10 ($10) 5
$5 15 ($7) 5
$5 20 ($3) 5
$5 25 $0 5
$5 30 $2 5
$5 35 $3 5
$5 40 $3 5
$5 45 $2 5
$5 50 $0 5
$5 55 ($3) 5
Costs of Production and Profit Maximization Analysis for the Perfect Competitive Market Structure
$0
$10
$20
$30
$40
$50
$60
$70
1 2 3 4 5 6 7 8 9 10 11 12
Output
Total Costs of Production
Total Fixed Costs (TFC)
Total Variable Costs
(TVF)
Total Costs (TC)
Marginal Cost = Marginal Revenue
Maximum Profit at Profit Maximizing Output
1. Marginal cost and marginal revenue is a profit maximizing production level
because when MR > MC there is money to be made off of further production.
Stopping short of that equality is a failure to maximize the total profit you'd get
from producing and going beyond it would cause losses.
2. If the price fell to 4.25 then the profit maximization would occur at about 7
outputs/hr. But it would be a negative profit.
3. Since the company would have negative profits coming in it would probably
be a good idea to stop operating, but other factors should be examined before
doing so.
Maximum Profit at Profit Maximizing Output
revenue is a profit maximizing production level
because when MR > MC there is money to be made off of further production.
Stopping short of that equality is a failure to maximize the total profit you'd get
from producing and going beyond it would cause losses.
2. If the price fell to 4.25 then the profit maximization would occur at about 7
3. Since the company would have negative profits coming in it would probably
be a good idea to stop operating, but other factors should be examined before
Total Output
Units
Price Per
Unit
(Demand)
Total
Revenue (TR)
Total Costs
(TC)
Total Profit
(TP)
Average
Total Costs
(ATC)
Marginal
Cost (MC)
0 $8.00 0.00 10.00 -10.00 --
1 $7.80 7.80 14.00 -6.20 14.00 4.00
2 $7.60 15.20 17.50 -2.30 8.75 3.50
3 $7.40 22.20 20.75 1.45 6.92 3.25
4 $7.20 28.80 23.80 5.00 5.95 3.05
5 $7.00 35.00 26.70 8.30 5.34 2.90
6 $6.80 40.80 29.50 11.30 4.92 2.80
7 $6.60 46.20 32.25 13.95 4.61 2.75
8 $6.40 51.20 35.10 16.10 4.39 2.85
9 $6.20 55.80 38.30 17.50 4.26 3.20
10 $6.00 60.00 42.70 17.30 4.27 4.40
11 $5.80 63.80 48.70 15.10 4.43 6.00
12 $5.60 67.20 57.70 9.50 4.81 9.00
Monopoly Profit Maximizing Analysis

0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
1 2 3 4 5 6 7 8 9 10 11 12 13
P
r
i
c
e
,

M
a
r
g
i
n
a
l

R
e
v
e
n
u
e
,

a
n
d

C
o
s
t
s

Output
Monopoly Profit Determination
Average Total Costs (ATC)
Marginal Cost (MC)
Marginal Revenue (MR)
Price Per Unit (Demand)
20.00
30.00
40.00
50.00
60.00
70.00
80.00
T
o
t
a
l

C
o
s
t
/
T
o
t
a
l

R
e
v
e
n
u
e

Revenue-Cost Comparison
Total Revenue (TR)
Total Costs (TC)
0.00
10.00
20.00
1 2 3 4 5 6 7 8 9 10 11 12 13
T
o
t
a
l

C
o
s
t
/
T
o
t
a
l

R
e
v
e
n
u
e
Output
Total Costs (TC)
Marginal
Revenue
(MR)
7.80
7.40
7.00
6.60
6.20
5.80
5.40
5.00
4.60
4.20
3.80
3.40
Demand Price
MC=MR
Average Total Cost
1.Marginal cost and marginal revenue is a profit maximizing production
level because when MR > MC there is money to be made off of further
production. Stopping short of that equality is a failure to maximize the
total profit you'd get from producing and going beyond it would cause
losses.

2. The monopolist uses the demand curve to find total revenue and
marginal revenue as in all profit maximization, the firm will then pick the
quantity that results in MC = MR.

3. The inequality between price and marginal cost is what makes monopoly
inefficient as well as the downward sloping demand curve that comes with
it.