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Production Decisions and Profit Maximization for Monster Bicycle Manufacturing Company in Perfectly Competitive Market Conditions

A business economics assignment analyzing production decisions and profit maximization strategies in a competitive market.

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Running Head:Monster Bicycle Manufacturing Company1Monster Bicycle Manufacturing CompanyStudent NameCourse NameInstructor NameDateAnalyzethe production decisions of Monster Bicycle Manufacturing Company under differentmarket conditions. Discuss how the firm can maximize its profit in a perfectly competitivemarket, and explain the concept of market equilibrium, including the long-run adjustmentprocess. Additionally, describe how changes in market prices impact the firm’s productiondecisions and profits.Word Count Requirement:750-1000 words

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Running Head:Monster Bicycle Manufacturing Company2Executive SummaryThe present report is a detailed analysis with respect toproduction decisions to be undertaken byMonster Bicycle Manufacturing Cycle to maximize its profits under different market conditions.Production ChoicesThe cost incurred and the revenue earned for Monster Bicycle Manufacturing Company fordifferent production units is shown below under the conditions of perfectly competitive marketwith the market price being $500 per bicycle. It is important to note that in a perfectlycompetitive market firms are price takersand any action taken by a firm say price reduction willbe replicated by competitors.The profit-maximizing level of output is a production level that achieves the greatest level ofeconomic profit given existing market conditions and production cost.Now the following graphshows the Total Profit under different production quantities

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Running Head:Monster Bicycle Manufacturing Company3Thus it is evident that the Total Profit is maximized when the production quantity for the firm is11 units and the company breaking even as is the case when it produces 13 units with the marketprice being $500.The marginal revenue indicates how much total revenue changesfor a firmby producing onemore or one less unit of output.The marginal cost indicates how much total cost changes byproducing one more or one less unit of output.The Marginal Revenue and the Marginal Costcurves for the firm are shown below:
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