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5-2 Discussion: Costs of Production In a competitive market, there are many buyers and sellers. The goods offered are largely the same, and firms can

5-2 Discussion: Costs of Production

In a competitive market, there are many buyers and sellers. The goods offered are largely the same, and firms can freely enter or exit the market. Buyers and sellers are both price takers. The amount of output produced determines the revenue of a firm. Costs of production are an important factor in determining profitability of a company.

First, research a publicly traded U.S. company and share it in your initial post. This could be the company you selected for your project or a different firm. For this discussion, assume that the firm is competing in a perfectly competitive market.

Then, in your initial post, address the following:

  • Identify 3 fixed costs and 3 variable costs for the firm.
  • How would the firm you chose determine the profit maximizing quantity to produce?
  • Why are fixed costs different in the short term versus the long term?
  • Apply economic theory to explain when the firm you chose would decide to shut down in the short term or exit in the long-term referring to price considerations and the Average Variable Cost and Average Total Cost curves. Use examples from the textbook to support your explanation.

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