In a Monopolistic Competitive market, a firm is a price searcher, but since there are many close substitutes to the product, it needs to spend more money on advertisement in order to differentiate its brand from other brands. You are interested in becoming a franchise in this market, but unsure of the competition even though there is very little barriers to entry. If Fixed Costs remains at $1,000.00 for Nike and $5,000 for Reebok, where are the firms’ new profit maximization point, break-even point, and shut-down point? Graph the TC and TR on one graph then graph the D, MR, MC, ATC, AFC, and AVC on another graph. Locate the total revenue, total profit, and total costs on the graph.
| Q | P=D | TC | TR | TP | ATC | TVC | AVC | AFC | MC | MR |
| 0 | $399.99 | $1,000 | ||||||||
| 10 | $379.99 | $3,000 | ||||||||
| 20 | $359.99 | $4,000 | ||||||||
| 30 | $339.99 | $5,000 | ||||||||
| 40 | $319.99 | $7,000 | ||||||||
| 50 | $299.99 | $9,500 | ||||||||
| 60 | $269.99 | $12,000 | ||||||||
| 70 | $239.99 | $15,000 | ||||||||
| 80 | $199.99 | $18,000 | ||||||||
| 90 | $149.99 | $22,000 | ||||||||
| 100 | $99.99 | $25,000 |
Nike
| Q | P=D | TC | TR | TP | ATC | TVC | AVC | AFC | MC | MR |
| 0 | $399.99 | $5,000 | ||||||||
| 10 | $379.99 | $5,500 | ||||||||
| 20 | $359.99 | $6,000 | ||||||||
| 30 | $339.99 | $7,100 | ||||||||
| 40 | $319.99 | $9,000 | ||||||||
| 50 | $299.99 | $10,500 | ||||||||
| 60 | $269.99 | $12,000 | ||||||||
| 70 | $239.99 | $13,500 | ||||||||
| 80 | $199.99 | $15,000 | ||||||||
| 90 | $149.99 | $17,000 | ||||||||
| 100 | $99.99 | $17,500 |
Reebok
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