Question

You are working for Langley Lettuce Ltd. Life is good! But your boss is confused and rushes in ! “Look at this mess of data the accountants have given me! I can’t make any sense of it. All I want to know is: How much should I produce? What should I charge? What will my profit be? And the economist on the radio this morning said that lettuce is selling into a perfectly competitive market. What the heck does that mean?” You look at the numbers and give your boss some answers

Qd P $ TC $ ATC $ MC $ TR $ MR $ Profit $

0 60 --- ---

600 180

1000 240

1200 264

1500 0.24 336

Answer 1

You should produce the quantity at P = MR = MC as the market is perfectly competitive. But we need some cost data to calculate all these numbers. The profit is the difference between total revenue and total cost.