Cost of Production and Profit Maximization Report
Use the Cost Structure and Profit Microsoft(r) Excel(r) charts and spreadsheet to analyze an energy generation firm and describe their respective cost structures, such as variable, fixed, average, and marginal structures. Explain the profit maximization principles assuming the firms operate in a purely competitive market.
Analyze the differences in costs of production and determine the firm’s profitability. Specifically, if market prices change, what does this mean for the profitability of each business? When do these firms make losses but continue to operate or shut down?
Apply incremental cost and contribution analysis to make a business decision for the energy generation firm. Why are marginal costs more important for the decision-making for the firm than average variable or total costs?
Summarize the analysis of your report in no more than 1,040-words in terms of an energy generation firm being (1) profitable (2) unprofitable–but staying in business–or (3) unprofitable–going out of business–and the implications this has for the firm’s management.
Format your report consistent with APA guidelines.
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